8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page FC1
UNDERSTANDING BRITISH LAND 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page IFC1
OUR PERFORMANCE
UNDERLYING PROFIT BEFORE TAX1 NET ASSET VALUE PER SHARE2 £256m 567p OUR 2010: £249m 2010: 504p REAL TRUS UNDERLYING EPS1 IFRS NET ASSETS 28.5p £4,930m British L 2010: 28.4p 2010: £4,208m aim is to direct ac IFRS PROFIT BEFORE TAX PORTFOLIO VALUATION3 which w £830m £9,572m security 2010: £1,128m 2010: £8,539m We focu mainly in DIVIDEND PER SHARE TOTAL (ACCOUNTING) RETURN1 committ 26.0p 17.7% people v 2010: 26.0p 2010: 33.5% different finance e create e 1 For definition see glossary of terms. 2 EPRA (European Public Real Estate Association) basis. 3 Proportionally consolidated. commu
Forward-looking statements This Report contains certain ‘forward-looking’ statements reflecting current views on, among other and information contained in this Report relating to British Land or its share price, or the yield on its things, our markets, activities and prospects. Such ‘forward-looking’ statements can be identified by shares, should not be relied upon as an indicator of future performance. the use of ‘forward-looking’ terminology, including terms such as ‘believes’, ‘estimates’, ‘anticipates’, Any forward-looking statements made by or on behalf of British Land speak only as of the date they are ‘expects’, ‘forecasts’, ‘intends’, ‘plans’, ‘projects’, ‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’, made and no representation or warranty is given in relation to them, including as to their completeness ‘should’ or similar expressions or in each case their negative or variations or comparable terminology. or accuracy or the basis on which they were prepared. Other than in accordance with our legal and By their nature, forward-looking statements involve risk and uncertainty because they relate to regulatory obligations (including under the Listing Rules and Disclosure and Transparency Rules), future events and circumstances which may or may not occur and may be beyond our ability to control British Land does not undertake to update or revise forward-looking statements to reflect any changes or predict. Forward-looking statements should be regarded with caution because of the inherent in British Land’s expectations with regard thereto or any changes in information, events, conditions or uncertainty in political, economic, market and business factors. Actual outcomes and results may differ circumstances on which any such statement is based. materially from any outcomes or results expressed or implied by such forward-looking statements, Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 01 of the Year 2011 of the Year Property Company TO BUILD THE BEST REITs p13–14 and p183 and p13–14 WHAT IS A REIT? WHAT which companies are (REITs) Trusts Investment Real Estate rental from on profits taxation corporate from exempt are properties. of investment gains on the sale and capital income the remove in 2007 to status The REIT established Government REITs investors. estate real inequalities between different tax profits property 90% of their UK rental distribute to required are of property dividends (PIDs). in the form income on information more For Understanding British Land Understanding British Land is one of Europe’s largest REITs and our REITs largest of Europe’s British Land is one with investors provide We best. be Europe’s aim is to range of property a diverse assets to access direct delivering and develop, finance which we manage, growth. as capital as well security of income properties, and office on prime retail focus We occupiers high-quality which attract in the UK, mainly 250 million over Each year leases. long to committed 1,000 properties visit our house over which people our property and Through organisations. different partners to experienced expertise we attract finance and local in which businesses environments create thrive. can communities OUR AIM IS AIM OUR INVESTMENT ESTATE REAL EUROPE IN (REIT) TRUST 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 01 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 02
02 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 03 shows that we contributed almost £900 million almost shows that we contributed 1 carried out by PricewaterhouseCoopers. Recent research Recent 1 Study, April 2011, Footprinting British Land Economic of Gross Value Added to the UK economy in 2009/10 through through in 2009/10 economy the UK to Added Value of Gross Our occupiers and supplier expenditure. operations our direct their own business billion through an additional £10.6 contributed spent consumers estimate activities at our properties. We on our and superstores department £4.7 billion in around stores are estate retail our entire across and sales 2010, during sites by British enabled employment Total greater. significantly clearly jobs, including those 142,000 be around to Land is estimated their through and indirectly by our occupiers generated directly supplier expenditure. approach demands a responsible Our size and substance we This year and seriously. willingly a duty take we business; to experts consulting strategy, responsibility our corporate reviewed and benchmarking practice best evaluating on a range of issues, our performance. help drive such as sustainability on issues leadership believe We REIT our aim of building the best to core and are our performance but occupiers value their precise It is difficult measure to in Europe. that efficiency and want premises for looking increasingly are Place, Ropemaker commitments. their own corporate express sustainable most one of the City’s in May 2009, remains completed fully it is now market occupational a challenging buildings. Despite of our approach. its quality example and a good to a testament let; the of Lucinda Bell to the promotion announced we In March, We Graham Roberts Director. as Finance succeed to Board contribution his excellent Lucinda and thank Graham for welcome stewardship his strong and for many years over the Group to two also appointed function. We of the finance and leadership Chairman of Greenhill in Simon Borrows, Directors Non-executive LLP, and William Jackson, Chief Executive & Co International our Board of Bridgepoint. Both have further strengthened Earlier in the year, of Clive Cowdery. the retirement following during years 11 after the Board from Robert Swannell retired which time he served Chairman and Senior as Audit Committee both Robert thank their Clive for and We Independent Director. the Board. to contributions strong I also thank everyone at British Land and our many business over grow work has helped our business partners whose hard and 2010/11 had a strong months. The business the 12 past about the prospects confident well and we remain performing is the business. for Chris Gibson-Smith Chairman 22 May 2011 the scale of our operations operations of our the scale on this benefit and pass our partners to in terms experience of knowledge, and opportunity.” “We derive huge benefit from benefit huge “We derive At British Land, we are facing the future with the future facing are At British Land, we portfolio Our London office comprises confidence. that meet evolving buildings modern, flexible and we own some of the best needs occupier want to consumers where UK, in the assets retail and profitably. efficiently trade shop and retailers the ‘Age of to ’Recession’ from as a nation, we have moved While, are shopping and good businesses still are consumers Austerity’, served British Land has been well by the quality, grow. to looking of our portfolio. and sustainability location our portfolio, activity a decisive and across leasing Concentrated development, London office Central to commitment significant a strong to acquisitions, all contributed and a series of retail improvements as we delivered an active year over performance see a good recovery to continued We our business. throughout growth with rental and achieved our assets of in the value and office retailers key from space demand for continued at the annual recognised were achievements These occupiers. delighted when we were April 2011, in Awards Property Week named Property be to of the Year. Company 2011. 31 March to the year for very reported results pleasing We up excluding 9.9% at £256 million were profits pre-tax Underlying of our property The value in 2009. release provision a credit per share billion with NAV £9.6 portfolio by 6.9% to increased a fourth quarter is proposing The Board 567 pence. to up by 12.5% for per share dividend bringing the total dividend of 6.5 pence, in respect a 91% payout representing 26 pence to the full year that it is our intention year, the coming earnings. For of underlying with quarterly dividends at 26 pence the dividend is maintained of 6.5 pence. months 18 last the and over strong remain Our finances billion debt and revolving £1.1 over refinanced we successfully well positioned UK for available is clearly Finance facilities. and quality of our properties and and the strength businesses secure underpin our ability to to continue income, their rental funding successfully. competitive create to we started a number of projects During the year, office committed largest London’s Central what is currently on, the opportunity early recognised, We programme. development London and will in Central cycle major office by a new provided and 2014, between 2012 space, deliver 2.2 million sq ft of high-quality values. and capital with rising rents market a constrained into billion, £1.1 totals of which our share billion, of £1.6 An investment including a 700,000 sq ft building for sites spans six separate Building in sq ft Leadenhall the 610,000 UBS at Broadgate, building, and the 500,000 sq ft NEQ district insurance London’s estate. Place our Regent’s completing we derive huge benefit is large: footprint economic British Land’s our this benefit on to of our operations and pass the scale from and opportunity. experience partners of knowledge, in terms Understanding British Land Understanding CHAIRMAN’S STATEMENT CHAIRMAN’S 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 03 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 04
UNDERSTANDING BRITISH LAND
PRIME REAL ESTATE PORTFOLIO FOCUSED ON RETAIL AND LONDON OFFICES PORTFOLIO WELL POSITIONED OTHER FOR CAPITAL GROWTH 2% RETAIL OFFICE British Land is one of Europe’s largest REITs. We own or manage 66% 32% over 33 million sq ft of properties focused on sectors well placed to benefit from growing occupier CITY 61% demand. UK RETAIL 94% WEST END 38% EUROPE RETAIL 6% PROVINCIAL 1%
PROPERTIES OWNED OR MANAGED BRITISH LAND SHARE £14.9bn £9.6bn
HIGH-QUALITY INCOME SECURE INCOME PROFILE High occupancy and long lease lengths UNDERPINNING OUR DIVIDEND
Our properties attract high-quality Rent expiring Occupancy Average in next occupiers on long-term leases. This rate1 lease length2 three years2 gives us one of the strongest income Income profile %Years% profiles of any major European REIT. Retail 97.9 12.1 9.3
Offices 97.8 9.4 6.4
Total 97.8 11.5 8.4
OCCUPANCY RATE1 AVERAGE LEASE LENGTH2
1 Including space under offer or subject to asset management. 98% 11.5 years 2 Until first break.
STRONG BALANCE SHEET SUPPORTING GROWTH
Our secure, long-term income means Proportionally we are able to finance our business Group consolidated with debt from a broad range of sources IFRS net debt (£bn) 1.7 4.4 on competitive terms. We maintain Weighted average debt maturity (years) 10.7 10.1 substantial credit facilities to support Weighted average interest rate (%) 4.7 4.9 our current and future investment Loan to value (%) 24 45 Interest cover (times) 3.0 2.2 needs without needing to raise project Committed undrawn facilities (£bn) 2.3 2.3 specific financing.
INTEREST COVER1 LOAN TO VALUE1 AVERAGE DEBT MATURITY1
2.2 times 45% 10.1 years 1 Proportionally consolidated.
04 Understanding British Land 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 05 Pages 01–09 Understanding British Land
CREATING INCREMENTAL VALUE PARTNER OF CHOICE MAXIMISING CAPITAL EFFICIENCY We create incremental value by developing, Around half of our property assets are held repositioning assets and exploiting market in joint ventures and funds, allowing us to Pages 11–23 Strategy anomalies. broaden our access to properties and spread our risk. Our scale and expertise make > 2.2 MILLION SQ FT CENTRAL LONDON OFFICE us a partner of choice for organisations with DEVELOPMENT PIPELINE complementary skills and interests. > 1.4 MILLION SQ FT OF COMMITTED RETAIL DEVELOPMENTS JOINT VENTURE PARTNERS > OVER 4 MILLION SQ FT OF PROSPECTIVE Blackstone Group Sainsbury’s DEVELOPMENT OPPORTUNITIES London & Stamford Tesco Oxford Properties Universities Superannuation Scheme Pages 25–57 Our portfolio For more information on developments For more information on our joint ventures and funds p36–37, 48–49, 52–53 p89–90
PRIME PROPERTIES WITH HIGH-QUALITY OCCUPIERS ENDURING OCCUPIER APPEAL
Top 10 properties British Land Sq ft Occupancy Lease RETAIL Share OFFICE Share (by British Land share of value) share ‘000 rate1 length2 Top 10 customers of rent Top 10 customers of rent
1 Broadgate 50% 4,436 96.5% 8.2 1 Tesco 7.4% 1 UBS 3.8% 2 Regent’s Place 100% 1,210 98.3% 9.2 2 Sainsbury’s 6.4% 2 HM Government 2.2% Pages 59–61 Financing strategy 3 Meadowhall 50% 1,376 98.2% 10.5 3 Debenhams 4.3% 3 Bank of Tokyo-Mitsubishi 1.7% 4 Ropemaker Place 100% 594 99.3% 15.6 4 Homebase 2.3% 4 Macquarie Group 1.6% 5 Drake Circus 100% 560 98.5% 7.7 5 B&Q 2.2% 5 Herbert Smith 1.5% 6 Teesside Shopping Park 100% 460 100.0% 9.7 6 Next 2.0% 6 RBS 1.3% 7 Debenhams, Oxford Street 100% 367 100.0% 28.0 7 Boots 1.3% 7 Aegis Group 0.9% 8 York House 100% 132 100.0% 6.5 8 Asda 1.1% 8 JP Morgan 0.9% 9 Forster Square, Bradford 100% 246 100.0% 10.1 9 Currys 1.1% 9 Reed Smith 0.9% 10 St Stephen’s, Hull 100% 410 98.4% 9.6 10 Marks and Spencer 1.1% 10 Gazprom 0.8%
1 Including space under offer or subject to asset management. 2 Until first break. Pages 63–70 Corporate responsibility
RESPONSIBLE BUSINESS A FEW OF THE HIGHLIGHTS ACHIEVED OVER THE PAST YEAR:
Taking a responsible approach to business > REAL ESTATE LEADER – OEKOM CR REVIEW 2010 and making sure we achieve high levels of > USED 15% LESS ENERGY AND 14% LESS WATER efficiency and sustainability in our buildings ACROSS OUR LIKE-FOR-LIKE PORTFOLIO THAN TWO and developments is central to the way we YEARS AGO, SAVING OCCUPIERS ALMOST £1 MILLION run British Land and of increasing importance > BREEAM EXCELLENT SUSTAINABILITY RATINGS to current and potential occupiers. AT ALL OFFICE DEVELOPMENTS > NET IMPROVEMENT IN SITE BIODIVERSITY AT 90% OF OUR MAJOR DEVELOPMENTS > 80% GOOD OR EXCELLENT CUSTOMER RATING SIGNIFICANTLY OUTPERFORMING INDUSTRY AVERAGES
For more information on our approach to corporate responsibility p63–70 and visit britishland.com/crreport2011
Understanding British Land 05 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 06
OUR MARKETS OVERVIEW
> THE UK HAS A BROAD AND LIQUID PROPERTY MARKET > A LIMITED SUPPLY OF LAND COMBINED WITH A GROWING POPULATION > INCOME RETURN UNDERPINNED BY STRONG LEASE STRUCTURE > ATTRACTS A RANGE OF DOMESTIC AND INTERNATIONAL INVESTORS
In 2007, The Investment Property Forum estimated in capital values have been much more volatile as shown in the that the commercial property investment graph below. After a decade of good total returns, the UK property sector was severely impacted by the financial crisis in 2007/08 market in the UK was worth around £760 billion. with capital values falling by around 40%. Values have recovered Retail, offices, and industrial property account significantly over the last two years. for the majority of this, with other smaller sectors including leisure, residential, student An important benchmark in property for investors is the income yield (rental income divided by the value of the property) relative accommodation and healthcare properties to the yield both on other properties and alternative investments. making up most of the balance. Retail and London offices have been the most vibrant sectors of The investment market is broadly owned, principally by: listed the investment property market over the last ten years, reflecting property companies, including REITs (which account for around strong growth in the consumer, financial and business services 15% of the total); pension funds; private companies; and an sectors. The retail sector has produced more stable returns both increasing number of international investors who see the UK in terms of rental income and capital value with rental income as an attractive and stable place to invest. In 2010, London had correlated quite closely with nominal GDP growth over the period. the highest turnover of investment properties by value of any Office performance has tended to be more volatile, reflecting the city worldwide. twin impacts of development and economic cycles.
Rental income is a more important component of investors’ Within the overall property market, the best quality assets, returns in property than in many other sectors outside bonds commonly called prime, have tended to outperform. The chart and cash. Over the last 20 years, rental income has accounted below shows the sharp differential between rental growth in for 81% of the total returns generated by the UK property sector prime and secondary properties over the last ten years. This according to the Investment Property Databank (IPD), a widely has been particularly the case in retail and London offices, which used provider of real estate performance analysis. The absolute as outlined on the following pages, has been driven by long-term level of income generated returns has been relatively stable changes in occupier demand. British Land’s portfolio is focused through the economic cycle while the returns from movements on prime properties in these two sectors.
LONG-TERM UK PROPERTY RETURNS % PRIME vs SECONDARY RENTAL GROWTH All property year-on-year 30 8
6 20 4 10 2
0 0
–2 –10 –4 –20 –6
–30 –8 1992 1997 2002 2007 2011 20022003 2004 2005 2006 2007 2008 2009 2010 2011 Capital growth Income return Prime Secondary Source: IPD
06 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 07 % Source: IPD Source: All industrials All ORS AND BETWEEN BETWEEN ORS AND All retails All offices Strong demand for quality assets with high income security. with high income quality assets demand for Strong London office the Central into flows investor International the banks. particularly from market, to coming assets in Increase market remained high, accounting for two thirds of all deals thirds two for high, accounting remained market months. 12 in the last Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 1 1 0 –1 –7 –2 –5 –3 –4 –6 –8 > > > OUTLOOK property the UK for the outlook Looking forward, expect we continuing positive but with performance be broadly to market perspective. and regional both a sector from uneven be to with a widening a two tier market polarisation is creating In retail, terms value gulf between prime and secondary, in both rental point inflection see a small but definite demand. We and investor secondary for rents where not clear but are rents prime retail for stabilise. property will eventually and we trends divergent of widely also a case it’s offices, For with regions, ahead, with many forge London to Central expect at best. stagnating some exceptions, active in the coming be more to market the investment expect We their stockpile particularly as banks work their way through year and scarce will remain speculative finance However, of assets. ideally conditions secondary, creating for limited, the appetite opportunistic activity. increased to suited INVESTMENT MARKET INVESTMENT UK COMMERCIAL PROPERTY RENTAL GROWTH (QUARTERLY) Source: IPD Source: % All industrials All 2010/11 VALUATIONS UP 4.9%; TOTAL RETURNS 11.3% RETURNS TOTAL 4.9%; UP VALUATIONS 2010/11 MARKED DIFFERENCE IN PERFORMANCE BETWEEN SECT SHORTAGE SUPPLY FROM BENEFIT TO CONTINUED RENTS OFFICE LONDON PRIME LOCATIONS RETAIL BEST GROWTH IN RENTAL OF SIGNS EARLY LONDON IN ASSETS, PARTICULARLY PRIME FOR STRONG DEMAND INVESTOR PRIME AND SECONDARY SECONDARY AND PRIME All retails All offices Further growth in Central London office rents, particularly rents, London office Further Central growth in outside London weak growth generally Demand and rental schemes retail on the best growth signs of rental But early but supply announced; projects development London office Key in prime where space remains in short remains supply. space in prime where about growth and concern subdued economic reflecting spending cuts. the impact of Government expand to and look performing stores poorly exit as retailers locations. on the stronger average, given shortage long-term below significantly still finance. of development Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 8 6 4 2 0 > > > > > 10 –2 –4 –6 –8 –10 > > > > As in 2009/10, there was a marked variation in performance variation was a marked there As in 2009/10, – London offices propertybetween the various subsectors performer different – and between the was again the standout –grades of property asset quality best assets or prime the outperformed secondary. KEY TRENDS MARKET OCCUPATIONAL After a spectacular recovery in 2009/10 following in 2009/10 recovery a spectacular After property the UK in 2007/08, the near 40% falls with capital pace steady a more at grew market 2011. March months to up by 4.9% in the 12 values UK COMMERCIAL PROPERTY RETURNS (QUARTERLY) Capital return quarter-on-quarter Understanding British Land Understanding OUR MARKETS OUR RECENT PERFORMANCE 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 07 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 08
OUR MARKETS UK RETAIL
> SIGNIFICANT CHANGES IN RETAILER AND CONSUMER BEHAVIOUR > SALES POLARISING TO FEWER, MORE DOMINANT LOCATIONS > LACK OF NEW SUPPLY INCREASING DEMAND FOR ESTABLISHED, PROFITABLE LOCATIONS > EARLY SIGNS OF RENTAL GROWTH IN BEST LOCATIONS DESPITE CONSUMER SQUEEZE
The retail market continues to undergo significant The retail property market has had a tough few years: overall change. Sales have consolidated into the hands capital values are still 20% below their peak despite a 23% recovery in the last 18 months and rental values across the of a smaller number of stronger retailers, market continue to fall, down a further 0.6% in 2010/11. including the national grocery chains who today account for the vast proportion of food sales and The polarisation in trading performance continued during the year. nearly 15% of non-food sales. Better retailers sought to protect sales and margins by closing poorly performing, often smaller in-town stores and expanding in the best locations. In prime locations vacancy rates are low at Increasing car ownership and convenience has significantly 2.3% and falling with rental values increasing by 1.7%. There are enhanced the attractiveness of out-of-town shopping. Retailers early signs of rental value increases in certain areas as retailers have focused on fewer stores in locations which provide them with look through to 2012/13 when consumer spending is expected to accommodation which is much more flexible and easily accessible start improving. By contrast vacancy rates in secondary retail space to shoppers. According to CBRE data, half of all retail goods were remain high at 12.2% with rental values down by 3.6% in 2010/11. sold through 200 locations in 1971; by 2008 this had fallen to 90. Looking forward, demand for the best space is expected The retail occupational market has been highly polarised to continue to grow, with further pressure on consumer as a result. Retail parks and the better shopping centres have spending anticipated to accelerate the restructuring of retailers’ outperformed high street shops, once considered the best prime store portfolios. In addition, the growth in online sales (now retail. We expect this trend to continue. Grocery and fashion representing 8% of total UK retail spend) is expected to further chains have expanded their out-of-town space most aggressively focus the demand for physical retail space which is larger, in recent years taking advantage of the comparatively low rents flexible and easily accessible. This reflects our definition of prime available on retail parks. It has been those out-of-town retail being retail assets in the best locations at affordable rents and properties (retail parks) with planning consents allowing the dominating their local catchment. At the same time, supply sale of fashion and food which have performed the best, seeing of quality space is forecast to remain at historically low levels strong growth in rents and values. reflecting the limited amount of committed retail development and the continued lack of development finance.
IPD PRIME AND SECONDARY RETAIL RENTAL VALUE GROWTH UK RETAIL DEVELOPMENT PIPELINE December 2000 = 100 160 25
150 20 140
130 15 120
110 10
100 5 90
80 0 March 2001 March 2011 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Prime Secondary Source: IPD Retail warehouse Town centre Supermarket Source: Property Market Analysis
08 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 09 Source: Drivers DeloitteSource: Jonas Average annual development completions of 3.7 million sq ft sq million 3.7 of completions development Average annual 1996 2015 Under constructionUnder (speculative) Completions 1990 2002 2008 9 8 7 6 5 4 3 2 1 0 CITY AND WEST END OFFICE DEVELOPMENT COMPLETIONS ft sq Million Looking through the cycles, the demand for high-quality office high-quality the demand for the cycles, Looking through and Quality of building, location significantly. has grown space the determining are credentials, sustainability recently more lease. a new to commit decision to in an organisation’s factors have been made and occupier advances And as technological become to buildings have tended change, older requirements attractive. less two has performed the last well over market The London office Rents have started ahead by 26.8%. values capital with years months. Although 12 the last up by 6.7% over with ERVs grow to sluggish, this upturn in performance growth remains economic At a time imbalance. demand supply a growing has been due to long-term facing are number of occupiers when a significant is there space, new for look to expected and are expiries, lease offices. of high-quality supply a limited activity is picking up, Looking forward, although development means supply finance, of development availability the limited with speculative development levels, at low remain to is expected average. the long-term below significantly Forecast Source: Drivers Jonas Deloitte (historic) and Consensus (forecast) Average Agents’ 1996 2014 West End LONDON IS A MAJOR GLOBAL CENTRE FOR FINANCIAL AND BUSINESS SERVICES BUSINESS AND FINANCIAL FOR CENTRE MAJOR IS A GLOBAL LONDON INVESTMENT PROPERTY THE BIGGEST MARKET IS CURRENTLY OFFICE LONDON OCCUPIERS HAVE STRONG PREFERENCE FOR MODERN BUILDINGS VALUES AND RENTS IN RECOVERY CYCLICAL DRIVING IS SPACE OF NEW SHORTAGE MARKET FOR INTERNATIONAL INVESTORS INTERNATIONAL MARKET FOR SPACE THE BEST FOR City 1990 2002 2008 0 > > > > 60 20 80 40 120 100 As a financial and business services centre servicesAs a financial and business centre importance and major contributor of global a special London enjoys economy, the UK to of global position as one of a small number and include a skilled cities. Its attractions economic and political labour force; diverse system. legal and a transparent stability; and liquid real is an international market The London office around from range of investors a broad attracting market estate with a than retail, cyclical been more the world. It has, however, booms and economic of development influence significant more in the City than marked have been more downturns. The cycles of Canary the development Wharf in the End: reflecting the West and cost low its large, to City occupiers which attracted 1990s Canary from The competition Wharfefficient financial factories. their planning regime, the City relax authorities to encouraged buildings, including taller of larger, enabling the development End, (known as the Gherkin). The West Re Tower the Swiss a more reflecting cycles severe has seen less by contrast, tightly with a more combined planning environment restrictive structure. held ownership CITY AND WEST END OFFICE RENTAL PERFORMANCE £ per sq ft Understanding British Land Understanding OUR MARKETS OUR LONDON OFFICES 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 09 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 10 Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 11 13 Our strategy Our 13 15 in action Strategy FOR OUR STRATEGY WE AIM TO DELIVER DELIVER TO WE AIM SHAREHOLDERS SUPERIOR TOTAL RETURNS 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 11 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 12
12 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 13 TUS. Chris Grigg Chief Executive ESTABLISHED IN 2007, REITS ARE NOW NOW ARE REITS 2007, IN ESTABLISHED COMING OF AGE. BRITISH LAND’S BUSINESS, LAND’S BRITISH AGE. OF COMING WITH PRIME PROPERTIES GENERATING BY HIGH-QUALITY SECURED INCOME RENTAL LEASES, IS WELL LONG ON OCCUPIERS SUITED TO OUR REIT STA Our portfolio and focused balanced is well potential with good long-term on sectors and value. in income growth Understanding British Land Understanding OUR STRATEGY OUR > BY CHRIS GRIGG BY CHRIS 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 13 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 14
OUR STRATEGY “Our view is that the REIT structure means we need to be more focused AN OVERVIEW on ensuring that our investors can rely on a secure and growing dividend underpinned by sustainable property rental income flows.”
British Land has been a Real Estate Investment between 2006 and 2008. The resilience of our income flows meant Trust, or REIT, since 2007. The REIT sector is that we were able to maintain this high level of dividends despite well established in a number of countries around the 40% fall in UK commercial property values during 2007/08. the world, notably in the US and Australia. But Where we have made changes to our business to adapt to REIT in the UK, it is still relatively new, born into the status, it has been to intensify our focus on income generation extraordinarily difficult and volatile property and and reduce the potential volatility in the value of our capital. The disposal of 50% of our holdings in Meadowhall and Broadgate credit markets of 2007. In many ways it is only in 2009 reduced the risk in our portfolio both by cutting our exposure now really coming of age. to single large assets and lowering the proportion of the business financed through debt. Letting activity and acquisitions over the last 18 months have more than compensated for the net income The REIT structure aims to provide a balanced, tax efficient and low we gave up through these two strategic disposals. You can read cost way for institutions and private individuals to invest in property more on our approach to asset allocation on pages 26 and 27 and access the rental income streams arising from owning and and financing on pages 59 to 61. managing property. Compared to direct property ownership, REITs provide investors with access to a more diverse range of assets Our ambition is to be recognised as the best REIT in Europe – which are actively managed by property experts who are able to through the strength of our leadership skills; the quality of our access a broad range of lower cost finance. And because they are property and financing expertise; the quality and sustainability listed, the investments are able to be more readily bought and sold. of the environments we create for our occupiers; our ability to attract high-quality partners; and the returns we deliver to If you look back over the last 20 years, rental income has accounted our shareholders. for 80% of total direct property returns in the UK. Our view is that the REIT structure with its requirement to distribute 90% of tax Our objective is to deliver superior total returns for our shareholders. exempt profits from property rental income as dividends, means Over the following pages, we explain how we aim to achieve this we need to be more focused on ensuring that our investors can objective by: rely on a secure, and growing dividend underpinned by sustainable property rental income flows. Capital growth remains critical not 1. Creating sustainable and growing property rental income; only as the natural consequence of high-quality, growing rental 2. Investing in assets which protect and grow the capital streams but also as a way of creating new capital to invest value over the medium to long term; in growth and generating outperformance. But this increased focus on security of income distribution as dividends requires 3. Creating incremental value through developing, repositioning a more balanced approach to risk and short-term capital value assets and exploiting market anomalies; movements than has generally been the case in the listed UK 4. Controlling our costs to maximise profit generation; property sector in the recent past. 5. Exploiting our scale and financial strength. British Land’s business – focused on rental income flows secured by high-quality occupiers with long leases on prime properties – We also believe that leadership on issues such as sustainability was already well suited to REIT status. On conversion we significantly help drive our performance and we aim to be the best at the increased our dividend payout, with dividends ahead by 106% sustainability issues that matter most to us and our stakeholders.
14 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 15 p23 Exploiting Exploiting our scale and financial strength 5. p22 Controlling Controlling our costs maximise to profit generation 4. p20–21 Creating incremental through value developing, repositioning and assets exploiting market anomalies 3. p18–19 Investing in Investing which assets and protect the capital grow over value the medium term long to 2. p63–70 p16–17 Being the best at sustainability issues that matter most to us to Being the best at sustainability most issues that matter and our stakeholders Creating sustainable and growing property income rental OUR OBJECTIVE: OUR our shareholders for returns superior total deliver To PRIORITIES: STRATEGIC OUR OUR VISION: OUR in Europe Trust Investment build the best Real Estate To CORPORATE RESPONSIBILITY: 1. STRATEGY STRATEGY IN ACTION IN Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 15 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 16
16 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 17 subject to asset management. asset subject to 1 or under offer Including space 2 break. first To 2 To learn more about this development more learn To www.drakecircus.com As one of the West Country’s most popular shopping destinations, most Country’s As one of the West both Devon covering area catchment has an extensive Circus Drake million people. 19 of nearly and Cornwall, and an annual footfall opened in 2006, is well configured The 560,000 sq ft Shopping Centre, are shop in. The rents to people for environment and an attractive for is potential there locally, competition and with limited affordable and formats has 70 units in modern retail The Centre growth. rental by Primark, Marks and Spenceris anchored and Next with other such as Topshop, retailers including established occupiers key brands such retail growing fast as newer Boots and H&M as well as Cult/Superdry and Republic. RENT EXPIRING IN YEARSNEXT THREE 8.4% 2 AVERAGE LEASE LENGTH 11.5years CREATING SUSTAINABLE CREATING AND GROWING PROPERTY INCOME RENTAL IN ACTION 1 CASE STUDY
Acquisitions during the year included £363 million of existing retail included £363 million of existing Acquisitions during the year streams. income our annual rental adding £23 million to assets, trade retailers positions where local All the schemes have strong in Shopping Centre Circus Drake was purchase well. Our largest £240 million, a net initial yield of 6%. which was bought for Plymouth, OCCUPANCY RATE Our assets are well located and designed to well located are Our assets occupiers. range of high-quality a broad attract is underpinned stream The quality of our income and low leases long rates, by our high occupancy expiry subject to (see rent of contracted levels the IPD above all of which are below), statistics industry benchmark. DRAKE CIRCUS SHOPPING CENTRE, PLYMOUTH CENTRE, SHOPPING CIRCUS DRAKE 97.8% Our core business consists of high-quality assets capable capable assets of high-quality consists business Our core Our streams. income growing and secure of generating those sectors on is focused strategy investment long-term demand from we expect where of the property market longer the medium to over be the strongest will occupiers and and Europe in the UK prime retail well located term: will provide in these sectors Assets London offices. Central pay a high and enabling us to flows cash rental the core and its growth dividend and fund the business growing equity and debt finance. priced competitively through STRATEGY Understanding British Land Understanding 1. 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 17 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 18
STRATEGY IN ACTION INVESTING IN ASSETS WHICH 2. PROTECT AND GROW THE CAPITAL VALUE OVER THE MEDIUM TO LONG TERM
As well as investing in strong rental income streams, we need to ensure we both protect and grow the value of the underlying assets. We need to continually renew and upgrade our portfolio to retain its quality, the security of our income and its attraction to investors. Our portfolio is focused on well located retail units where consumers and retailers increasingly want to be. Our office buildings are modern work environments that provide the quality and flexibility occupiers now want and which meet their increasing technology and sustainability needs.
CASE STUDY TRANSFORMING REGENT’S PLACE, LONDON
Over the past 25 years, British Land has developed estate placing significant emphasis on the design of the communal buildings and improved the working environment spaces with £8 million invested in public realm improvements.
at Regent’s Place, transforming this 13-acre In 2009, we completed two buildings at 10 and 20 Triton Street West End estate. and a residential development at One Osnaburgh Street, comprising both social and high-end apartments. Despite the During our ownership, the estate has evolved through asset challenging market conditions, all the residential units were pre- management, refurbishment and development to provide high- sold ahead of our expectations with the offices 96% let within nine quality, flexible accommodation on floor plates that are rarely months of completion. On completion of our final phase of NEQ, available in the West End. Today, it is a vibrant multi use estate, in 2013, the estate will have doubled in size over the last four home to a broad range of high-quality occupiers and over 98% years to 2 million sq ft where 14,000 people will work or live. occupied. As a result, the estate has performed well, consistently outperforming the IPD West End benchmark on rental growth In recognition of our partnership with the local community and and capital returns over the past five years. commitment to regeneration, we were awarded the Royal Town Planning Institute’s Award for Sustainable Communities in The transformation started in the 1990s but it is more recently February 2011. that the most significant changes have been made. Working in partnership with the architect Sir Terry Farrell and local To learn more about this development communities we have developed a visionary masterplan for the www.regentsplace.com
SIZE UPON COMPLETION OF NEQ 2013 OCCUPANCY RATE1
1 Including space under offer and 2 million sq ft 98% subject to asset management.
18 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 19 Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 19 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 20
20 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 21 OOR PLATES OVERALL SIZE OVERALL INDIVIDUAL FL to 6,000 sq ft at the top of the tower they are already generating already are they of the tower 6,000 sq ft at the top to the across from range of occupiers a broad from interest sectors. business and corporate financial, professional insurance, and are piling and basement works started we 2011, In early completion Practical mid-year. start to construction on schedule quarter of 2014. in the third is expected shell and core to non-binding heads agreed we had we announced In May 2011, at the sq ft pre-let a 191,000 for with Aon Limited of terms a further up to 85,000 take with options to 4–13) building (levels 14–18). sq ft (levels 6,000–21,000 sq ft 6,000–21,000 610,000 sq ft 610,000 s will deliver 2.2 million to Central London’s largest London’s Central to amme. Thi CREATING INCREMENTAL DEVELOPING, THROUGH VALUE ASSETS AND REPOSITIONING MARKET ANOMALIES EXPLOITING IN ACTION CASE STUDY Based in the heart of the City of London the Leadenhall Building is district, insurance sites. development current one of our largest agreement joint venture our we completed 2010, In December of Properties, the property business investment with Oxford the building, develop a major Canadian pension fund, to OMERS, property with two world-class companies bringing together management expertise. and asset development proven quality sq ft of the highest 610,000 At 736ft (224m), and providing of the one become building is set to the 47-storey space, office scale The spectacular buildings in the City. iconic and most tallest trees at the base of the building, with mature of the public space half nearly covering and amenity provision and a range of retail London. in Central will be unprecedented an acre, sizes of floor varied shape delivers tapering The development’s the London. Locating over views all with spectacular plates, floors clear adaptable, for of the building allows to the rear core sq ft at the base of the building 21,000 Ranging from at each level. LEADENHALL sq ft of prime office space to the market between 2012 between 2012 the market to space of prime office ft sq rising supply, of constrained a backdrop against and 2014 put to we expect During 2011, values. and capital rents we believe where investments behind capital more anomalies. market and exploit assets reposition can we office development progr office development Where we see the right opportunity,Where invest we will with the objective in assets a proportion of our capital example A good recent value. incremental of creating a shortage London where in Central market is the office of development with a lack coupled space of high-quality development underpin strong to is expected debt finance billion £1.6 we have committed year, Over the last returns. billion) £1.1 (British Land share: STRATEGY Understanding British Land Understanding 3. 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 21 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 22
STRATEGY IN ACTION CONTROLLING OUR 4. COSTS TO MAXIMISE PROFIT GENERATION
Controlling our operating costs so that we maximise the amount of profit we generate will continue to be a key focus of our business. Based on the percentage of net operating costs relative to our gross property rental income – currently 13.5% – we are one of the most efficient listed property companies in the UK. We are able to keep operating costs low through a combination of having a small and efficient Head Office, maintaining high levels of occupancy across our portfolio and owning efficient modern properties.
CASE STUDY MANAGING COSTS FOR OCCUPIERS
Controlling costs is a discipline we pass on to our excellent with satisfaction with value for money at nearly 60% partners. We actively manage occupancy costs, versus a national average of 3%. Over 80% of office occupiers rate us good or excellent with satisfaction for value for money while ensuring we deliver the right environment at 65% versus a national average of 14%. for the occupier, by effective management, smart procurement and creative thinking. Following a pilot at our York House Head Office building where we installed a new energy metering system and optimisation process Not only does our scale mean we are able to negotiate competitive helping to cut British Land influenced energy use by nearly 40%, rates on behalf of 1,000 occupiers (in 2010 we achieved property we are now rolling out this system across our office and retail insurance rates more than 10% lower on average than in 2008) portfolios so that more businesses can recoup the benefits and it also means that many small initiatives add up to big savings. savings. This collaborative approach, sharing information, providing support and funding energy reviews to highlight how savings can We focus on modern high-quality buildings with efficiency be made, has been recognised by prestigious industry awards. built in but also believe there is always more you can do. It is our approach to getting the best efficiencies from our existing Elsewhere we have switched to local suppliers, reduced waste portfolio that really marks us out from the crowd. to landfill and subsequent taxes, increased recycling, and a long-term approach to planned preventative maintenance, Last year we carried out our fourth independent customer easing out peaks and troughs in cost cycles all contribute to service survey. 80% of our retail occupiers rated us good or cutting and controlling costs.
3 Platinum awards AND SIX GOLD AWARDS AT PROPERTIES INDEPENDENTLY AUDITED AGAINST THE SERVICE CHARGE CODE IN 2010/11
22 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 23 1 consolidated. Proportionally In 2010, it successfully raised a new £185 raised a new it successfully million seven-year In 2010, The strength at maturity. facility an existing replace to loan term meant that a streams income rental of the joint venture’s The overall facility. the whole provide bank was willing to single than the maturing facility. lower was achieved rate finance was the joint venture with the refinancing, In conjunction after renewal the second a further years, for ten extended in 1996. its establishment 1 AVERAGE DEBT MATURITY 10.1 years 1 EXPLOITING OUR OUR EXPLOITING FINANCIAL AND SCALE STRENGTH IN ACTION CASE STUDY 45% LOAN TO VALUE TO LOAN BLT Properties Limited, is a 50:50 joint venture Properties Limited, BLT which between British Land and Tesco, and one retail superstores owns eight Tesco million. at £334 valued park currently BLT PROPERTIES LIMITED PROPERTIES BLT Our scale, knowledge and expertise in UK property and expertise in UK knowledge Our scale, major investors. partner us a natural for makes of choice of working with record track an established have We expertise with complementary major institutions Group, Blackstone including our own, to and interests Properties, Sainsbury’s, Oxford London & Stamford, Scheme. Superannuation and Universities Tesco streams income and security of our rental The scale on competitive our business finance us to enables support to facilities credit substantial and maintain terms the last needs. Over investment and future current has of banking finance when the availability years, few has finance to our access constrained, highly become of companies number few made us one of a relatively development. in major London office invest to able STRATEGY Understanding British Land Understanding 5. 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 23 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 24 Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 25 Retail Offices in London 26 An overview 26 An 27 and strategy Structure overview 28 An 30 Strategy 31 Superstores 32 centres Shopping 34 warehouses Retail 36 Development 38 properties retail Our top overview 42 An 44 Strategy 46 City 48 City development 50 End West 52 End development West 54 properties Our prime office OUR PORTFOLIO OUR OUR PORTFOLIO OUR CONSISTENTLY OUTPERFORMS FOCUSED ON UK UK ON FOCUSED RETAIL AND CENTRAL OFFICES, LONDON 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 25 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 26
OUR PORTFOLIO AN OVERVIEW
PORTFOLIO HIGHLIGHTS OVER 33 million sq ft OF PROPERTY SPACE £9.6 billion PORTFOLIO VALUE (BRITISH LAND SHARE) £14.9 billion ASSETS OWNED OR MANAGED £575 million CONTRACTED RENT 98% OCCUPANCY RATE 11.5 YEARS AVERAGE LEASE LENGTH TO FIRST BREAK 8.4% OF RENT SUBJECT TO BREAK/EXPIRY OVER NEXT THREE YEARS 3.6 million sq ft COMMITTED DEVELOPMENT
“A combination of strong and consistent rental streams, future rental growth potential and sustained occupier demand for our retail and office portfolio means we are well positioned.” Steve Smith Chief Investment Officer
PROPERTY PORTFOLIO % (AT MARCH 2011) OTHER RETAIL OFFICE 2% 66% 32%
CITY 61% UK RETAIL 94% WEST END 38% EUROPE RETAIL 6% PROVINCIAL 1%
26 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 27 LLION, City 19.6 21.3 West End West 12.3 15.0 Provincial 0.2 0.2 Actively managing our portfolio to maximise income growth; maximise income managing our portfolio to Actively and programme development our substantial Executing of investment supply of an increasing advantage Taking extracting value through pre-letting; pre-letting; through value extracting valuations. sustainable opportunities at more Retail Offices: officesTotal OtherTotalOf which development 65.8 32.1 4.0 61.6 2.1 100.0 36.5 11.4 1.9 100.0 > > > returns is strong. The majority of the remainder is in City offices majority The of the remainder is strong. returns in nature cyclical be more can upswing in returns the where time. over exposure our moderate to we will look and where % of portfolio Reported – 2011 March Pro-forma PERFORMANCE of the property portfolio analysis rigorous undertake regularly We is each asset and ensure the optimal structure establish to and allocation Our asset expectations. meeting our performance against outperformance consistent on prime has delivered focus and by IPD, in rental as measured property market the broader the short both over terms, and medium term. value capital LOOKING AHEAD polarise between prime to will continue the market believe We and good secondary in both the and poor quality assets well positioned are We markets. and investment occupational flows cash quality and sustainable with a portfolio of exceptional to well placed are pipeline. We development and a strong advantage and take development through returns enhance opportunities. of investment volume of a growing further invest to and finance to and access have the capacity We in 2011, range of opportunities diverse emerge to a more expect work through to continue institutions particularly as the lending opportunities attractive books. The most their property loan leverage we can deals where complex be the more to likely are of our property and financial skills with the strength the breadth sheet. of our balance main priorities: on three focused Going forward we will remain ROPERTY WORTH £14.9 BI ROPERTY WORTH £14.9 IAL P BRITISH LAND OWNS AND MANAGES A PORTFOLIO MANAGES LAND AND OWNS BRITISH OF COMMERC OF WHICH OUR SHARE IS £9.6 BILLION. BILLION. IS £9.6 SHARE OUR WHICH OF A combination of strong and consistent rental streams, future streams, rental and consistent of strong A combination occupiers demand from and sustained potential growth rental portfolio and office means that British Land is well our retail for these sectors, Within performance. deliver excellent positioned to high performance These are is on prime assets. our focus and which meet the current buildings, in the right locations high-quality attract consistently They needs of occupiers. future terms. on favourable leases long-term take willing to occupiers underpinned by a sustainable that prime assets, believe We growth than deliver more generally income, rental and growing on focus to will continue We quality property. average or poorer portfolio acquisitions through and upgrading our core renewing and developments. of our portfolio propertiesThe balance held for comprises good quality cash secondarydevelopment, property with strong deliver added value. to be improved which can and assets flows over value incremental meaningful generate Our objective is to and assets by repositioning in development, investing by time these to anomalies. Our exposure market exploiting through our circumstances, depending on market will fluctuate assets of opportunities. of risk and the availability Over the assessment the growing reflecting increase to our exposure we expect year, next opportunities investment of attractive and our desire volume cycle. at this point in the economic our risk profile increase to development our weighting to increased have significantly We of our total share months and British Land’s 12 the past over On a pro- billion at the year-end. at £1.2 stands commitment at their estimated basis, that is including the developments forma values, at today’s investments and our standing value, completion The value. asset of gross is 11% exposure our development London on the Central is focused majority of our programme upturn in a cyclical early we have invested where market office from those available exceed significantly to returns and expect End, in the West Our programme prime investments. standing build our to is intended 44% of the total, which represents and growth for outlook the long-term where a market to exposure Our portfolio with a substantial balanced is well in sectors investments high-quality weighting to growth, long-term for with the potential with and London offices retail UK principally portfolio in Europe. retail a small high-quality > Understanding British Land Understanding STRUCTURE AND STRATEGY OUR PORTFOLIO OUR 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 27 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 28
RETAIL AN OVERVIEW
RETAIL HIGHLIGHTS 27 million sq ft OF RETAIL SPACE £6.3 billion PORTFOLIO VALUE (BRITISH LAND SHARE) £9.9 billion RETAIL ASSETS OWNED OR MANAGED £380 million CONTRACTED RENT 98% OCCUPANCY RATE 12.1 YEARS AVERAGE LEASE LENGTH 9.3% OF RENT SUBJECT TO BREAK/EXPIRY OVER NEXT THREE YEARS 1.4 million sq ft COMMITTED RETAIL DEVELOPMENT
“We own some of the best retail assets in the UK. These provide our occupiers with modern, flexible and affordable environments which allow them to thrive.” Charles Maudsley Head of Retail
RETAIL PORTFOLIO % (AT MARCH 2011) RETAIL SUPERSTORES SHOPPING DEPART- WAREHOUSES CENTRES MENT STORES 46% 22% 25% 7%
28 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 29 visit retail properties retail Brent Park Tesco Brent Neasden Town Lane Tesco Southport Chiswick Sainsbury’s London Sainsbury’sPurley Way Croydon Tesco Bursledon Southampton Glasgow Fort Shopping Park Fort Shopping Glasgow Glasgow ParkShopping Teesside Stockton-on-Tees Crown Point Shopping Park Denton The Beehive Centre Cambridge ParkOrbital Shopping Swindon Park Shopping Nugent Orpington Park Retail Giltbrook Nottingham Park Retail Centre Oldham Centre Kingston The KeynesMilton Park Shopping Parkgate Rotherham Forster Square Retail Park Bradford Fort Kinnaird Edinburgh Park Retail Wheatley Doncaster p31–41 1 2 3 4 5 6 7 8 9 1 2 3 4 5 11 12 13 10 For more detailed information detailed more For on our britishland.com SUPERSTORES RETAIL WAREHOUSES 4 6 4 4 1 6 3 1 Meadowhall Shopping Centre Shopping Meadowhall Sheffield Centre Shopping Circus Drake Plymouth Shopping Centre Stephen’s St Kingston-upon-Hull Centre Shopping Eastgate Basildon Centre Accord Bon Nicholas Centre St and Aberdeen Green Serpentine Centre Shopping Peterborough Other British Land British Other properties Debenhams, OxfordDebenhams, Street London Puerto Venecia Puerto Venecia Zaragoza 3
9 3 4 5 6 7 1 1 2 SHOPPING CENTRES SHOPPING UK EUROPE DEPARTMENT STORES 2 5 13 7 10 1 11 5 8 3 5 2 12 1 2 ITALY FRANCE 7 UK SPAIN PORTUGAL Understanding British Land Understanding OUR TOPRETAIL PROPERTIES RETAIL 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 29 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 30
RETAIL STRATEGY
> RETAIL IS CORE TO BRITISH LAND’S PROPERTY PORTFOLIO. IT CONTRIBUTES SIGNIFICANTLY TO THE SUSTAINABLE CASH FLOWS WHICH UNDERPIN OUR DIVIDEND AND FINANCE OUR GROWTH.
British Land owns some of the best retail assets > Which are flexible – the unit configuration can be adapted in the country: according to CACI, the retail to retailers’ changing needs; research group, the average British Land asset > Which have the right environment – where consumers want ranks in the top 5% of most dominant retail to shop and spend their leisure time. centres in the country and we own one of the In line with the Group’s objectives of delivering total returns, top three shopping centres in the UK, nine of the we will continue to add to our prime portfolio through asset top 25 retail parks in the UK including five of the management investment and development and will: top ten retail super parks. In total, our shopping > Actively manage our prime portfolio to capture the recovery centres and retail parks access around 40% in retail rents and generate rental income growth. of the population of the UK. Investing in upgrading our retail offer to meet the evolving needs of today’s retailers and actively managing our occupier base which will allow us both to maintain our high Our focus is on high-quality locations where consumers want levels of occupancy and capture the rental growth potential to shop and retailers trade efficiently and profitability. Our portfolio in our portfolio. is well positioned to benefit from the significant changes to the retail market discussed on page 8. A reflection of this is that > Invest in high-quality prime assets. our rental values have grown by 0.8% per annum over the last five We will continue to seek to grow our portfolio by buying years versus the IPD benchmark at –0.6%. Through the recent assets in the best locations which meet the current and downturn, our portfolio has remained almost fully occupied and future needs of our occupiers. our rental values have started to grow at a time when rental > Invest in good secondary assets which have good values across the market continue to fall. underlying fundamentals. This means schemes which are well located and locally Looking forward, we expect retailers will continue to rationalise dominant where rents have stabilised and are at affordable their stores, focusing on fewer locations. The growth in internet levels and yields realistically compensate for relatively modest sales will add to the pressure on weaker locations but are likely levels of expected rental growth. These represent good solid to be highly complementary to prime. Vacancy rates are generally investment opportunities where the bulk of our total returns low in the better located schemes and there is relatively little will be delivered through income. new stock coming to the market over the next few years. There are beginning to be signs of upward pressure on rents at the best > Recycle capital to dispose of assets where we believe the retail locations, which should grow as the economy improves. valuations are not justified by their rental growth prospects. We will continue to refresh and upgrade our portfolio to We continue to believe in the out-of-town retail format. However, ensure it is optimally positioned to grow and outperform. our view is that property outperformance will require a much > Increase our exposure to opportunities where we can more asset specific approach than has been the case in the create incremental value: development, repositioning recent past. As the retail market rebalances, opportunities will and refurbishment opportunities. present themselves both out-of-town or in town. We believe the This will enable us to add to our prime estate and generate best performing assets will be ones: incremental value. At a time when the availability of high- > Which are in the right location – locally dominant and quality retail space is limited, we are actively expanding our accessible (for consumers and suppliers); development pipeline. > Where rents are affordable – where retailers can trade profitably; > Which have the right unit configuration and size – the right type of retail space;
30 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 31 CASE STUDY The 43,000 sq ft Tesco store in Ashford was bought in 1996 in 1996 was bought in Ashford store The 43,000 sq ft Tesco with Tesco. joint venture Properties Limited as part of our BLT the expanded significantly In 2002, a 33,000 sq ft extension and improving position its local strengthening footprint, store’s was extended In 2003, the lease growth prospects. its rental store the Ashford extend wish to now Tesco 2031. to years by ten planning obtained by another 20,000 sq ft and have recently the joint will fund. In 2010, which the joint venture consent simultaneous years, another ten for extended was venture of the maturing debt facilities. refinancing with the successful has with Tesco and investment expansion The continued portfolio deliver superior returns, to our foodstore enabled 730 bps outperforming benchmark by over the IPD All Retail years. three the last over TESCO, ASHFORD WITH SE TERM SAINSBURY’S OF PORTFOLIO SUPERSTORE LET TO TESCO AND LET TO 92% INCLUDING WE ARE THE LARGEST INVESTMENT HOLDER HOLDER LARGEST INVESTMENT THE WE ARE OF SUPERMARKETS OUTSIDE THE SUPERMARKETS THEMSELVES, WITH TESCO AND SAINSBURY’S OUR 22% OF APPROXIMATELY FOR ACCOUNTING ROLL. RENT TOTAL RETAIL 6 MILLION SQ FT 6 MILLION SECURE, LONG DATED INCOME DATED LONG SECURE, AVERAGE UNEXPIRED LEA UNEXPIRED AVERAGE BREAK YEARS FIRST TO 17 OF 40 SAINSBURY’S STORES, 35 TESCO STORES, 40 SAINSBURY’S STORES SOMERFIELD 14 AND STORES > > SHARE OF SHARE RETAIL PORTFOLIO > 22% Understanding British Land Understanding SUPERSTORES RETAIL 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 31 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 32
RETAIL SHOPPING CENTRES
> OUR SHOPPING CENTRE PORTFOLIO IS ANCHORED BY THE REGIONALLY DOMINANT 1.4 MILLION SQ FT PRIME OUT-OF-TOWN MEADOWHALL SHOPPING CENTRE IN SHEFFIELD. > OUR 12 SHOPPING CENTRES PROVIDE 800 RETAIL UNITS TOTALLING 5 MILLION SQ FT. > OUR SHOPPING CENTRES ATTRACT 64 MILLION VISITORS A YEAR.
CASE STUDY MEADOWHALL
Celebrating its 21st birthday in 2011, Meadowhall Over the last two years, we have invested £14.2 million at is one of only six out-of-town super regional Meadowhall, both to refresh the offer and broaden its appeal, ensuring it remains the pre-eminent shopping destination shopping centres in the UK. Situated alongside for the region. Junction 34 of the M1 motorway, three miles east of Sheffield city centre, over 24 million people In October 2010, we completed a £3.5 million refurbishment of visit the Centre each year to enjoy its wide range House of Fraser’s department store resulting in a 20% increase in sales. During the year new retail brands which opened stores of retail, leisure and food outlets. It provides included, Lakeland, G-Star, Pandora, Austin Reed, Country 1.4 million sq ft of accommodation over 191 acres, Casuals and Viyella occupying a total area of 15,000 sq ft. The and is home to some of the most established choice of Meadowhall for flagship stores, new concepts and second stores indicates the strength of the Centre’s offer and international and national retailers in the country its ability to dominate its catchment. including Debenhams, House of Fraser, Marks and Spencer, H&M and Hollister. The leisure offer continues to be enhanced. Anchored by the 11-screen Vue cinema, on completion later this year, the refurbished Oasis Food Court will provide seven restaurants and is attracting new brands such as Giraffe, Chaobaby and Rice. In addition, there are now 13 mall cafés including YO! Sushi, Blue Fig (a champagne bar) Costa and Starbucks. To learn more about this development www.meadowhall.co.uk
32 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 33 PROVIDE A DESTINATION EXPERIENCE A DESTINATION PROVIDE PROVIDES OF INCOME DIVERSITY OPPORTUNITIES, ASSET MANAGEMENT OPPORTUNITIES FOR GROWTH FOR OPPORTUNITIES PERFORMANCE TO MAXIMISE RENTAL > > > VISITORS EACH YEAR SQ FT OF SPACE SQ FT OF SPACE MEADOWHALL 24m 1.4m Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 33 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 34
RETAIL RETAIL WAREHOUSES
> WE ARE THE LARGEST OWNER/MANAGER OF RETAIL WAREHOUSE PARKS IN THE UK1. > 83% OF OUR RETAIL WAREHOUSE SCHEMES BENEFIT FROM THE WIDEST PLANNING CONSENT (OPEN A1) GIVING US THE FLEXIBILITY TO MEET THE NEEDS OF THE LARGEST POTENTIAL POOL OF OCCUPIERS.
1 Source: Trevor Wood Research
CASE STUDY GLASGOW FORT
Glasgow Fort is a great example of an open A1 The site opened in 2004 and provides space for 67 high-quality out-of-town retail park that dominates its local occupiers including Next, Zara, Boots, Topshop and River Island. New fascias were added during the year including a flagship catchment area. Adjacent to Junction 10 of the New Look store and new lettings to H&M, Bank, Poundland M8 in Glasgow, the 393,000 sq ft park combines and Greggs. The 393,000 sq ft Shopping Park provides a diverse a two-sided mall design recreating a high street range of tenants creating critical mass and convenience for the environment with the convenience and flexibility 12.5 million visitors per annum. of large out-of-town units. Its accessible, flexible We plan to significantly increase the size and range of the Park’s configuration and range of unit sizes provides offer through a two phase, 220,000 sq ft extension. A 45,000 sq ft a successful fashion-led retailing location that cinema development, comprising an eight-screen cinema and attracts 12.5 million shoppers a year. five restaurants is scheduled to start in the autumn with agreed terms with a leading national cinema operator and leading family orientated restaurants. In addition, negotiations are being finalised with Glasgow City Council for a 175,000 sq ft retail extension with 80,000 sq ft pre-let to Marks and Spencer.
To learn more about this development www.glasgowfort.co.uk
34 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 35 PROVIDING MODERN, EVOLVING RETAILING FLEXIBLE AND ACCESSIBLE AND FLEXIBLE RETAILING FORRETAILERS CONSUMERS AND MEET TO ENVIRONMENTS RESULTS NEEDS OCCUPIER IN RENTAL INCOME GROWTH > > Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 35 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 36
RETAIL DEVELOPMENT
> WE HAVE 1.4 MILLION SQ FT OF COMMITTED DEVELOPMENT. > WE ALSO HAVE 676,000 SQ FT OF RETAIL PLANNING CONSENTS AND PROSPECTIVE DEVELOPMENT OPPORTUNITIES OF UP TO A FURTHER 464,000 SQ FT. > AT THE TIME WHEN HIGH-QUALITY RETAIL SPACE IS LIMITED, OUR EXPERTISE WILL ENABLE US TO CAPITALISE ON OUR EXISTING PORTFOLIO AND EXPAND ITS DEVELOPMENT PIPELINE.
CASE STUDY WHITELEY VILLAGE
Whiteley Village, which we own in joint venture The redevelopment will allow us to transform the scheme with Universities Superannuation Scheme, into a retail destination with 61 highly flexible retail units in a pedestrianised town centre style environment, providing is our existing 166,000 sq ft factory outlet shopping with restaurants and cafés, spacious walkways anchored by a 36,000 sq ft Tesco superstore. and public realm areas. Located at Junction 9 of the M27 motorway, it sits midway between the two harbour cities The scheme has an affluent and growing catchment population, currently just over 1.1 million people. It is situated next to the Solent of Southampton and Portsmouth. We recently Business Park which has over 60 businesses employing around obtained detailed planning consent to redevelop 5,000 people, and is set to grow further with a planned 800,000 sq ft the factory outlet into 242,000 sq ft of Open A1 addition. The development of the new North Whiteley Village retail space, with a further 60,000 sq ft of is located just north of Junction 9 of the M27 motorway and will include 3,000 new homes, offices and a 75-room hotel and ancillary uses. community hub.
To learn more about this development www.whiteleyvillage.com
36 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 37 RETAIL UNITS RETAIL CATCHMENT CATCHMENT OF OVER HIGHLY FLEXIBLE FLEXIBLE HIGHLY 1.1 m 61 Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 37 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 38
RETAIL WAREHOUSES
£3.8 billion TOTAL VALUE £2.6 billion BRITISH LAND SHARE 78 RETAIL WAREHOUSE 1 GLASGOW FORT SHOPPING PARK, 2 TEESSIDE SHOPPING PARK, PROPERTIES GLASGOW STOCKTON-ON-TEES BRITISH LAND SHARE 39% BRITISH LAND SHARE 100% 53 RETAIL PARKS SIZE 393,000 SQ FT SIZE 460,000 SQ FT LONG LEASEHOLD OPEN A1 PARK UNITS 41 25 SOLUS UNITS UNITS 67 KIOSKS 11 KEY OCCUPIERS 9.7 million sq ft Marks and Spencer, New Look, Asda Living, KEY OCCUPIERS Arcadia, Next, Boots, WHSmith, Currys, Mothercare, River Island, TK Maxx, JD Sports TOTAL FLOOR AREA Asda Living, Next, Argos, Zara, Arcadia, Boots, New Look, Republic, TK Maxx, River Island, Teesside Shopping Park attracts 5.3 million Sports Direct, Mamas & Papas visitors per annum and continues to attract 83% leading retailers. During the year retailers Glasgow Fort continues to build on its strength including H&M, Republic and TUI travel agents WITH OPEN A1 USE as one of the pre-eminent fashion-led retail parks have taken accommodation on the Park. in the UK with an annual footfall of 12.5 million. To facilitate some of these lettings 9,000 sq ft Predominantly freehold, Rent passing, British New fascias added in the year include H&M, of additional floor space has gained planning £153 million per annum Land’s share Average Bank Fashion and a new flagship New Look consent for fully flexible open A1 retail £22 per sq ft rent Weighted average lease term store. In the year ahead we expect to commence accommodation. including breaks 10.4 years Occupancy levels 99% the 45,000 sq ft cinema development, comprising an eight-screen cinema and five restaurant units. www.teessideshoppingpark.co.uk Terms have been agreed with a major cinema operator and five national restaurant units. In addition, negotiations are being finalised with Glasgow City Council in respect of the proposed 175,000 sq ft phase two retail extension.
www. glasgowfort.co.uk
ST JAMES’ RETAIL PARK, NORTHAMPTON 12 FORT KINNAIRD, EDINBURGH BRITISH LAND SHARE 100% SIZE 176,000 SQ FT BRITISH LAND SHARE 19% FREEHOLD OPEN A1 PARK SIZE 510,000 SQ FT UNITS 10 FREEHOLD OPEN A1 PARK KIOSKS 1 7 GILTBROOK RETAIL PARK, UNITS 59 NOTTINGHAM KEY OCCUPIERS BRITISH LAND SHARE 100% KEY OCCUPIERS Argos, Boots, Currys, Early Learning Centre, Bhs, Boots, DFS, Next, Mothercare, Toys R Us SIZE 193,000 SQ FT H&M, HMV, JD Sports, Marks and Spencer, The open A1 Retail Park, which is located south A1 (PART OPEN/PART RESTRICTED) Next, Pizza Hut, Toys R Us, Wallis, WHSmith, west of Northampton, is anchored by a 30,000 sq UNITS 16 New Look and Vision Express ft Bhs store and 44,000 sq ft Toys R Us. The Retail Park has successfully attracted two new concept Fort Kinnaird is located just off the A1 outside drive thrus being Starbucks and Boots. The KEY OCCUPIERS Edinburgh, Scotland. It is owned by HUT in a conceptual stores will bring added traffic and IKEA, Next, Decathlon, Bhs, Boots, Comet, 50:50 joint venture with the Crown Estate. It has footfall to the Retail Park adding to the retailing Mamas & Papas, Pets at Home, Starbucks been developed in a number of phases with each experience. phase having anchor occupiers. Fort Kinnaird, Situated just off the M1, Giltbrook is within half was the first out-of-town retail warehouse www.stjamesretailpark.co.uk an hour’s drive of the region’s major cities with an development to attract high street retailers such annual footfall of 2.6 million, it is an example of a as Next and Boots. In addition to the 55 retail traditional retail park anchored by a 240,000 sq ft units and four food outlets, there is a factory IKEA store and opened in 2008. Over the last and additional offices. Marks and Spencer have 18 months, Decathlon have downsized enabling recently opened a new 60,000 sq ft general Next to take a 19,000 sq ft store resulting in merchandise store. Monsoon and Starbucks a 20% rise in income. have also recently opened. Orange and Thorntons www.giltbrookretailpark.co.uk are currently fitting out. www. fortkinnaird.co.uk
38 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 39 50 43 50% 100% 410,000 SQ FT 410,000 309,000 SQ FT
SOUTH-EAST LONDON HULL surreyquaysshoppingcentre.co.uk ST STEPHEN’S SHOPPING STEPHEN’S ST CENTRE, 3 BRITISH LAND SHARE LAND SHARE BRITISH SIZE UNITS KEY OCCUPIERS Next, Cult, H&M, sq ft Tesco, by 147,000 Anchored Look, Oasis, River Island, TK Maxx, Zara New has been at St Stephen’s offer The restaurant lettings with key during the year strengthened & Go, Co, Wok including Handmade Burger Spuds and The Red House. These lettings Just offer, leisure strong the Centre’s complement Nando’s, multiplex, which includes a six-screen and Starbucks. Prezzo has a very high occupancy St Stephen’s While include Superdrug lettings retail of 98% new rate and Phones 4U. by 22% following has also grown Car park income of the management contract. the termination controlled now directly and tariffs are The costs by British Land. www.ststephens-hull.com www. SURREY QUAYS, QUAYS, SURREY LAND SHARE BRITISH SIZE UNITS KEY OCCUPIERS Bhs, Boots, Currys Mothercare, Digital, Tesco, Look, River Island, JD Sports,New WHSmith Quays in a joint Surrey own Bought in 2009, we is The Shopping Centre with Tesco. venture in Rotherhithe on a peninsula of the south located bank of the River Thames and benefits from growing demand in this growth in occupier strong by is anchored suburb of London. The Centre and a 53,000 Foodstore Extra sq ft Tesco a 115,000 sq ft Bhs, with the mall units arranged mainly between the two anchors. level floor at ground cars. 1,400 It has parking for 3 70 43 100% 100% 131,000 SQ FT 131,000 560,000 SQ FT
PLYMOUTH drakecircus.com greenlanes.co.uk DRAKE CIRCUS SHOPPING DRAKE CIRCUS CENTRE, 2 ANCHOR STORES KEY OCCUPIERS Topshop, Next, Primark, Marks and Spencer, Look, Boots, H&M, Cult/Superdry,New Republic, River Island, Mothercare Circus Drake of Plymouth, in the middle Located popular shopping most Country’s is the West area, catchment with an extensive destination million 19 of nearly an annual footfall attracting has Circus Opened in 2006, Drake people. quarters three with nearly formats modern retail sq ft. 7,500 of the units over www. BRITISH LAND SHARE LAND SHARE BRITISH SIZE UNITS UNITS KEY OCCUPIERS Peacocks, Wilkinsons, Bhs, Topshop/Topman, Monsoon, M&Co, Look, Mothercare, New La Senza, River Island one Lanes is Green in February 2011, Acquired principal shopping locations, of North Devon’s It is every 5.5 million visitors year. attracting – rents affordable with highly let virtually fully £50–£80 in the are per sq ft range. Zone A rents www. GREEN LANES SHOPPING CENTRE, BARNSTAPLE LAND SHARE BRITISH SIZE 10 215 50% Weighted 9.9 years £92 million 1.4 MILLION SQ FT 1.4 MILLION £26 per sq ft
97% Average rent rent Average RETAIL UNITS MEADOWHALL SHOPPING CENTRE, MEADOWHALL SHOPPING SHEFFIELD 1 www.meadowhall.co.uk UNITS ANCHOR STORES KEY OCCUPIERS Marks and Spencer, Debenhams, House of Fraser, Zara Hollister, Primark, Bhs, Boots, H&M, Arcadia, and most is one of the largest Meadowhall – a prime in the UK shopping centres successful populated in a densely centre super regional 24 million visitors It has around area. catchment – 800,000 per week at peak time. In per year has units, the Shopping Centre the retail addition to cinema and 23 restaurants 54 kiosks, an 11-screen 3,300 people. with seating for and cafés include Phase added in the year fascias New Boux Lakeland, Eight, LK Bennett, L’Occitane, Rocks.The House of Fraser and Fashion Avenue following by 20% year-on-year increased turnover its £3.5 and the addition million refurbishment start on a is due to Work brands in 2010. new of 18 which will programme £7 million transformation of the Oasis catering the refurbishment extend at the upper restaurants new three creating offer, kiosk units unit and two and one restaurant level level. at the lower average lease term including breaks including breaks term average lease level Occupancy LAND SHARE BRITISH SIZE SHOPPING CENTRES 806 ft4.6 million sq AREA FLOOR TOTAL share British Land’s Rent passing, per annum £2.5 billion VALUE TOTAL billion £1.5 LAND SHARE BRITISH 11 Understanding British Land Understanding SHOPPING CENTRES SHOPPING 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 39 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 40
SUPERSTORES DEPARTMENT STORES
£2.5 billion £0.5 billion TOTAL VALUE TOTAL VALUE £1.3 billion 100% BRITISH LAND SHARE BRITISH LAND SHARE 99 SUPERSTORES 10 27 STORES 100% OWNED TESCO, PONTYPRIDD 72 STORES OWNED IN JOINT VENTURES DEPARTMENT STORES The joint venture has agreed to fund a 22,000 sq ft extension in Pontypridd. Work started 2.2 million sq ft 88% in March 2011 and is due to complete in STORES LARGER January 2012. TOTAL FLOOR AREA British Land currently has a second store Rent passing, British Land’s share £28 million THAN 40,000 SQ FT extension with Tesco under discussion of circa. per annum Average rent £12 per sq ft Weighted 20,000 sq ft in Ashford. average lease term including breaks 27 years, 62,000 sq ft AVERAGE to exp iry 31 years STORE SIZE 6.1 million sq ft TOTAL FLOOR AREA
Rent passing, British Land’s share £71 million per annum Average rent £21 per sq ft Weighted average lease term to break (and expiry) 16.8 years
SAINSBURY, HODDESDON AND DURHAM 1 DEBENHAMS, The joint venture sold four ex-growth properties OXFORD STREET, LONDON back to Sainsbury’s and purchased two new Nine stores, including the flagship Oxford Street, ones (Hoddesdon and Durham) in June 2010. London store, of 1.7 million sq ft are leased to These new stores have been put in our Debenhams for a minimum unexpired term of securitisation. British Land has also agreed 23 years. The leases provide for minimum 2.5% extensions at Thornhill (construction finished per annum rental increases and five-yearly open in April 2011), Kimberley (on-site, due to market reviews from 2019. complete August 2011) and Preston (on-site, due to complete September 2011). www.debenhams.com
40 Understanding British Land 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 41
EUROPE RETAIL DEVELOPMENTS Pages 01–09 Understanding British Land
£0.5 billion £92 million PROSPECTIVE SIZE UP TO 1.1 MILLION SQ FT TOTAL VALUE TOTAL VALUE WHITELEY VILLAGE, FAREHAM 302,000 SQ FT £0.3 billion £46 million GLASGOW FORT SHOPPING PARK, BRITISH LAND SHARE BRITISH LAND SHARE GLASGOW 220,000 SQ FT
FORT KINNAIRD, Pages 11–23 Strategy 1 2 EDINBURGH 133,000 SQ FT SURREY QUAYS SHOPPING CENTRE SHOPPING CENTRES SHOPPING CENTRE, SOUTH LONDON 103,000 SQ FT 11 6 POWER COURT, RETAIL WAREHOUSE RETAIL WAREHOUSE LUTON 100,000–200,000 SQ FT OTHER RETAIL PARK AND PARKS PARKS SUPERSTORE EXTENSIONS 182,000 SQ FT 3.8 million sq ft 2.5 million sq ft TOTAL FLOOR AREA TOTAL FLOOR AREA
Properties in Spain, Portugal, France and Italy, Pages 25–57 Our portfolio the majority of which are held within the Pillar COMMITTED Retail Europark Fund (PREF), in which we own a 65.3% stake. SIZE 1.4 MILLION SQ FT CURRENT VALUE £68 MILLION BRITISH LAND SHARE £34 MILLION COST TO COMPLETE WHITELEY VILLAGE (BRITISH LAND SHARE) £72 MILLION Whiteley Village is located just two minutes from PUERTO VENECIA Junction 9 of the M27 near Fareham, Hampshire. SHOPPING CENTRE, The scheme is held by a 50% joint venture ZARAGOZA 1.4 MILLION SQ FT between British Land and USS. Anchored by a SUPERSTORE EXTENSIONS 73,000 SQ FT Tesco superstore, detailed planning consent has been obtained subject to completion of a section 106 agreement, to redevelop the factory outlet Pages 59–61 Financing strategy element to provide 242,000 sq ft of Open A1 retail accommodation with a further 60,000 sq ft of ancillary uses. 7 PUERTO VENECIA RETAIL PARK, ZARAGOZA www. whiteleyvillage.com BRITISH LAND SHARE 50% SIZE 890,000 SQ FT UNITS 25
KEY OCCUPIERS 7 PUERTO VENECIA SHOPPING IKEA, Porcelanosa, Leroy Merlin, Media Markt, CENTRE, ZARAGOZA Conforama, Decathlon The successful trading Retail Park, opened in The 890,000 sq ft Retail Park is anchored by IKEA 2008, combined with early signs of improving Pages 63–70 Corporate responsibility and other leading Spanish retailers including operator sentiment in Spain is driving a re- Leroy Merlin and Media Markt. Opened in 2008 activation of the second phase, a 1.4 million sq ft the Retail Park now attracts over six million shopping and leisure centre, which is targeted visitors a year and represents the first phase of for opening in 2012. The scheme is already over the 2.3 million sq ft total development project. 60% pre-let or pre-sold and will be anchored by El Corte Ingles, Primark, Desigual, H&M and Cinesa. On completion, the combined Retail Park and Shopping Centre will provide a total of 2.3 million sq ft of prime out-of-town retail in Spain’s fifth largest city. SUPERSTORE EXTENSIONS We commenced five superstore extensions in the year within our Sainsbury’s Superstore joint venture, completing three. These were at Banbury, Kimberley, Preston, Rugby and Thornhill, and will increase the store sizes by an average of 24%.
Understanding British Land 41 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 42
OFFICES AN OVERVIEW
OFFICES HIGHLIGHTS 7.0 million sq ft OF OFFICE SPACE £3.1 billion PORTFOLIO VALUE (BRITISH LAND SHARE) £4.5 billion ASSETS OWNED OR MANAGED £180 million CONTRACTED RENT 98% OCCUPANCY RATE 9.4 YEARS AVERAGE LEASE LENGTH 6.4% OF RENT SUBJECT TO BREAK/EXPIRY OVER NEXT THREE YEARS 2.2 million sq ft COMMITTED DEVELOPMENT
“Our focus on the Central London office market reflects its position as a leading global city which attracts a depth and quality of demand from occupiers and investors not seen elsewhere in the UK.” Tim Roberts Head of Offices
PROVINCIAL OFFICE PORTFOLIO % (AT MARCH 2011) OFFICES CITY WEST END OFFICES OFFICES 1% 61% 38%
42 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 43 EC3 NW1 W1 W1 EC2 EC2 W1 EC2 7 EC2 5 6 1 Broadgate Estate Broadgate Ropemaker Place Marble Arch House Baker Street 2–14 95–99 Baker Street NEQ, Regent’s Place Building Leadenhall The Broadgate 5 Bishopsgate 199 CITY 1 2 6 7 1 2 3 4 5 CITY DEVELOPMENT 2 W1 SW1 SW1 W1
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V I R Regent’s Place Estate House York 39 Victoria Street Ebury Gate, Lower Belgrave Street Berners Street 16–18 21–25 James Street Swan House, 52–53 Poland Street 19–23 Wells Street Yalding House, Great Portland Street Land properties British Other 1 2 3 4 5 6 7 8 9 WEST END WEST 3 5 7 8 WEST END WEST 1 4 9 4 visit 6 2 office portfolio office 3 2 REGENT’S PARK REGENT’S p45–57 1 HYDE PARK HYDE For more detailed information detailed more For on our britishland.com Understanding British Land Understanding OFFICES OUR PRIMEOFFICE PROPERTIES IN LONDON 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 43 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 44
OFFICES STRATEGY
> OUR OFFICES PORTFOLIO IS FOCUSED ON THE CENTRAL LONDON MARKET WHICH TODAY ACCOUNTS FOR 99% OF THE £4.5 BILLION OF OFFICES WE OWN AND MANAGE IN THE UK.
Our focus on the London market reflects its > Actively manage our office weighting to deliver position as a leading global City and one of the outperformance – being a major source of performance for the Group during a cyclical upturn through development largest centres for financial services in the and acquisitions; and recycling capital as the cycle matures. world. London attracts a depth and quality We have a long track record of successfully developing and of demand from occupiers and investors not selling on profitably. Since 2004, we have developed 3.3 seen elsewhere in the UK. million sq ft in the City and sold the vast majority profitably. > Increase our exposure to the West End – the West End We believe that the office market in London will continue to be will form the long-term core of our office portfolio, helping a primary beneficiary of the capital’s pivotal global position with the Group achieve one of its main strategic objectives of demand for high-quality space expanding over the long term. a growing, sustainable rental income. We have steadily However, the market is also likely to continue to experience increased our exposure to the West End with 38% of our periodic cycles as the balance between supply and demand office portfolio today compared to 13% five years ago. fluctuates, particularly in the City given its proximity to Canary > Selective investment in residential to support office Wharf where the planning regimes are more relaxed. The West developments and add value – residential elements are End is one of the few sub sectors in real estate which has a core part of our West End mixed-use developments and experienced long-term rental growth due to sustained occupier we will seek to leverage our skills and expertise in residential demand and low supply as a result of its restrictive planning to enhance the value of these developments and create regime. We see this continuing. additional incremental value for the Group where we see attractive opportunities. Like retail, the changes in occupier trends in the office market have been significant. Today, occupiers increasingly want flexible, We recognised early on that we were at the start of a major high-quality open plan offices with larger floor plates, which are office cycle in Central London with a structural improvement in technologically and environmentally friendly. This is increasingly demand, falling levels of supply, rents having reached their lowest polarising occupier and investor demand between the best point and early signs on prime schemes of an improving rental offices which are occupied by high-quality businesses on long tone. During the year, we committed £1.1 billion of the Group’s leases and secondary offices which tend to be let to occupiers with capital to develop 2.2 million sq ft of mainly office space in Central lower quality covenants on much shorter terms in buildings which London. At today’s values, fully developed, these represent 27% become economically obsolete. Our office investments over the of our office portfolio and are balanced between the City and West years have been focused on high-quality prime buildings in the End in terms of British Land’s net exposure. Given the prospects City and the West End with active management of our estates for rental growth and investor appetite for Central London, we ensuring that we meet the changing demands of our occupiers. expect these developments to contribute significant additional performance to our portfolio. Looking forward, our strategic priorities in offices will be: > Continue to focus our office portfolio on modern, flexible In support of our development programme, we made a number work environments within Central London – ensuring we of early cycle acquisitions with Victoria Street, Baker Street, provide occupiers with high-quality spaces which meet their and Marble Arch House – all of which are in the West End. evolving needs. We are actively looking to make more acquisitions, where we can enhance returns through development and asset management. > Concentrate on assets where we can add value – by managing and improving income through active asset management of lease re-gears and new lettings.
44 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 45 specification and high levels of sustainability enable the building enable of sustainability and high levels specification a range of City of occupiers. meet the demanding requirements to with in the City combined plates floor some of the biggest It offers efficiency and adaptability. great Bank of Tokyo-Mitsubishi, Group, include Macquarie occupiers Key with an Securities, Markit and Liberum Capital Mitsubishi UFJ at years certain of 15.6 term lease unexpired average weighted of £44 per sq ft. rent an average contracted Designed and engineered by Arup Associates around a third of a third around by Arup Associates Designed and engineered are and the offices during construction the building was pre-let let. fully now market during the challenging of occupancy this level Achieving Place Ropemaker quality. the building’s to is testimony of 2009/10 pre-certification LEED building in the City achieve to is the first Excellent, BREEAM being rated rating of Platinum in addition to buildings. Some sustainable most making it one of the City’s a robust architecture, stunning terraces, 50,000 sq ft of roof CONSTRUCTION OF THE 20-STOREY, 594,000 SQ FT ROPEMAKER PLACE, 594,000 SQ FT ROPEMAKER OF THE 20-STOREY, CONSTRUCTION 2009. MAY IN WAS COMPLETED STREET, LIVERPOOL AND MOORGATE TO CLOSE LOCATED Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 45 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 46
OFFICES CITY
> OUR CITY OFFICES PORTFOLIO PRIMARILY COMPRISES 16 BUILDINGS ON THE BROADGATE ESTATE AS WELL AS ROPEMAKER PLACE. > OUR CITY PROPERTIES PROVIDE MODERN HIGH-QUALITY AND WELL LOCATED ACCOMMODATION THAT MEETS THE NEEDS OF FINANCIAL AND BUSINESS SERVICES COMPANIES. > WE OFFER BEST-IN-CLASS PROPERTY MANAGEMENT FROM ESTATE SERVICES TO THE DEVELOPMENT OF NEW BUILDINGS.
CASE STUDY BROADGATE, EC2
Broadgate, which we own in joint venture with Broadgate provides flexible modern working space which continues Blackstone Group, is London’s premier City to evolve to meet the needs and expectations of our occupiers. Over the last three years, we have extended the estate to add office estate and home to some of the world’s a further 800,000 sq ft of high-quality, flexible and sustainable largest financial institutions and leading accommodation through the construction of 201 Bishopsgate professional practices employing around 30,000 and The Broadgate Tower, strengthening our base of occupiers and enhancing the income profile. The estate benefits from high people on the estate. Comprising 16 independent occupancy at 97% and an average lease length to break of 8.2 years. office buildings, ranging in size from 78,000 sq ft to 418,000 sq ft, the buildings are set around In August 2010, we agreed a conditional pre-let to UBS for a 700,000 sq ft new building to replace the older buildings at 4 and four landscaped squares each providing a unique 6 Broadgate. This commitment by UBS to maintain Broadgate working environment, enhanced by over 50 as their UK headquarters and the successful lease re-gears restaurants, pubs, wine bars, shops and health undertaken during the year with occupiers such as Axa and Barings indicates the quality of workplace that Broadgate offers. clubs as well as hosting community activities and public art. In February 2011, planning consent was achieved for a major refurbishment of 199 Bishopsgate which will incorporate the latest innovations in terms of sustainability. Completion is due in late 2012 at a time when supply in the City is anticipated to be significantly constrained. To learn more about this development www.broadgateestates.co.uk
46 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 47 DING THE 400,000 SQ FT 12-STOREY BUIL THE 400,000 SQ FT 12-STOREY UNEXPIRED WEIGHTED AVERAGE THE LARGEST AND MOST PRESTIGIOUS THE LARGEST MOST AND BUILDINGS BROADGATE AT LEASE OF 8.2 YEARS; TERM AVERAGE SQ FT OF £48 PER RENT CONTRACTED IS LET TO A RANGE OF BANKS AND OF BANKS AND A RANGE IS LET TO INSTITUTIONS FINANCIAL OTHER 155 BISHOPSGATE (PICTURED) IS ONE OF IS ONE (PICTURED) 155 BISHOPSGATE > > > TOTAL SPACE 4.4m sq ft PEOPLE WORKING PEOPLE BROADGATEAT BUILDINGS BROADGATE 30,000 16 Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 47 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 48
OFFICES CITY DEVELOPMENT
> WE HAVE CENTRAL LONDON’S LARGEST COMMITTED DEVELOPMENT PROGRAMME DELIVERING 2.2 MILLION SQ FT OF HIGH- QUALITY SPACE BY THE END OF 2014. > ALL 1.5 MILLION SQ FT OF OUR CITY SPACE IS BEING DEVELOPED IN PARTNERSHIPS. > WE ARE BUILDING A 700,000 SQ FT OFFICE FOR UBS AT BROADGATE AND THE 610,000 SQ FT LEADENHALL BUILDING. > WE ARE REFURBISHING 199 BISHOPSGATE AT BROADGATE, INCORPORATING THE LATEST INNOVATIONS IN SUSTAINABILITY.
CASE STUDY 5 BROADGATE, EC2
In August 2010, British Land and joint venture Designed by Ken Shuttleworth of Make Architect, the building partner, Blackstone Group, signed an Agreement which includes four trading floors capable of accommodating approximately 750 traders per floor, will be a striking addition for Leases with UBS to develop a new 700,000 sq ft to Broadgate. building on the existing site of 4 and 6 Broadgate. This is one of the largest pre-lets ever signed in A new public route will be opened up east-west connecting the City of London and the building is scheduled Broadgate Circle with Sun Street Passage to provide a direct route to Liverpool Street Station and to Exchange Square to for completion in 2014. the north.
UBS is one of our longest standing and currently largest occupier The new building will have the highest standards of sustainability. at Broadgate. The new leases will be at an initial rent of £54.50 per Innovative environmental measures will be incorporated into sq ft, increased annually in line with RPI and an average lease the building design including generating low carbon energy length of 18.2 years. Our agreement with UBS also allows us the with photovoltaics and solar thermal panels, reducing water opportunity to extend some of their existing leases on the estate consumption by rainwater harvesting and increasing biodiversity thereby increasing income and extending lease lengths, and through the incorporation of green roofs and terraces. releases buildings elsewhere, creating opportunities for the estate to continuously evolve. Resolution to grant planning consent was confirmed in April 2011 subject to successful completion of outstanding statutory planning procedures. To learn more about this development www. 5broadgate.com
48 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 49 INITIAL RENT OF £54.50 RENT INITIAL PER SQ FT SUBJECT FT SQ PER SUBJECT RPI UPLIFT ANNUAL TO PRE-LETS EVER SIGNED SIGNED EVER PRE-LETS THE CITYIN OF LONDON ONE OF THE LARGEST ONE > > Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 49 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 50
OFFICES WEST END
> OUR WEST END PORTFOLIO CURRENTLY ACCOUNTS FOR 12% OF OUR TOTAL PORTFOLIO, UP FROM 5% FIVE YEARS AGO. > WE ARE GROWING OUR EXPOSURE TO THE WEST END OFFICE MARKET WHICH HAS A STRONG OUTLOOK FOR GROWTH AND RETURNS. > INCLUDING DEVELOPMENTS AT THEIR CURRENT ESTIMATED COMPLETION VALUE, WEST END OFFICES ACCOUNT FOR 15% OF OUR ASSETS.
CASE STUDY 20 TRITON STREET, REGENT’S PLACE, NW1
20 Triton Street forms part of the most recent 20 Triton Street is a 255,000 sq ft building that provides Grade A development phase at Regent’s Place which accommodation over nine floors. The spacious reception area leads to a full height atrium with wall-climber lifts and a bespoke was completed in 2009. Designed by Terry art installation by Gary Webb and there is a large wrap-around Farrell and Partners the development has roof terrace on the top floor. This was designed to enhance significantly extended and enhanced Regent’s biodiversity at the same time as providing attractive areas for Place, already a successful 13-acre West End occupiers. At around 31,000 sq ft the building offers large floor plates that are rarely available in the West End. office campus. This latest 490,000 sq ft development phase includes two new offices – The building was completed on time and within budget 10 and 20 Triton Street – and a residential and was 96% let within nine months. Key occupiers include tower – at One Osnaburgh Street. Gazprom, Lend Lease, Dimensional Fund Advisors and Ricoh with a weighted average lease length at March 2011 of 9.6 years. This just leaves part of the third floor remaining to let with good prospects for further enhancement of the rental tone on letting of this accommodation.
50 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 51 96% LET WITHIN NINE MONTHS’ MONTHS’ NINE 96% LET WITHIN SQ FT FLOOR 31,000 FLEXIBLE LEASE AVERAGE WEIGHTED OF PRACTICAL COMPLETION OF PRACTICAL AVAILABLE RARELY PLATES END THE WEST IN YEARS 9.6 LENGTH > > > Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 51 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 52
OFFICES WEST END DEVELOPMENT
> IN THE WEST END, ALL OUR DEVELOPMENTS ARE FULLY OWNED BY BRITISH LAND. > WE ARE BUILDING THE 500,000 SQ FT NORTH EAST QUADRANT (NEQ) BUILDING COMPLETING OUR REGENT’S PLACE ESTATE. > WE ARE REDEVELOPING MARBLE ARCH HOUSE AND 2–14 BAKER STREET, W1. > HIGH-END RESIDENTIAL FORMS A KEY AND HIGHLY PROFITABLE ROLE. > BREEAM EXCELLENT SUSTAINABILITY RATINGS FOR ALL OUR OFFICE DEVELOPMENTS.
CASE STUDY 2–14 BAKER STREET, W1
In April 2010, we bought 2–14 Baker Street for Designed by Jestico and Wiles, the scheme is a seven-storey £29 million for redevelopment. The site is located building, benefitting from natural light on four sides with typical floor plates of 20,000 sq ft. There are three floors at the top just north of Oxford Street on the corner of of the building that enjoy large accessible terraces with views Portman Square, an area of the West End which over London. is undergoing significant regeneration. The building has planning consent for 113,000 sq ft During the course of the year, we successfully re-geared the head lease with the Portman estate for a term of 125 years of office space and 20,000 sq ft of retail space. from practical completion of the scheme and entered into a Development Agreement with them. We successfully secured As part of the scheme we are also developing 19,000 sq ft of vacant possession of the building by September 2010 and started residential and 6,200 sq ft of retail space at 95–99 Baker Street on-site in October 2010. which has been profitably pre-sold. We anticipate that delivery of the building will be well timed to the market with completion programmed for first quarter 2013, at a development cost of £56 million.
52 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 53 DEVELOPMENT PRIME LOCATION ON ON LOCATION PRIME EXPECTED COMPLETION INCLUDES 19,000 SQ FT INCLUDES OF RESIDENTIAL STREET 95–99 BAKER AT OPPOSITE) (SHOWN THE CORNER OF THE CORNER W1 SQUARE, PORTMAN BELOW) (SHOWN 2013 IN FLOOR PLATES PLATES FLOOR OF 20,000 SQ FT HIGH-QUALITY FLEXIBLE HIGH-QUALITY > > > > Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 53 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 54
CITY OFFICES
£3.0 billion 100 Liverpool Street – 383,000 sq ft The office accommodation is occupied by UBS TOTAL VALUE with several retail units. 135 Bishopsgate – 340,000 sq ft £1.7 billion Comprises part of the RBS City campus BRITISH LAND SHARE headquarters. 155 Bishopsgate – 400,000 sq ft 5.0 million sq ft Multi-let to a number of major financial institutions, including Axa I.M, Baring Asset OFFICE (and associated 1 BROADGATE ESTATE Management, JP Morgan Energy Trading, Norinchukin Bank, Sumitomo and Tullet Prebon. retail and leisure space) BRITISH LAND SHARE 50% GRADE A OFFICE 199 Bishopsgate – 142,000 sq ft 100% freehold/virtual freehold interests (and associated retail Planning consent granted for comprehensive Rent passing £167 million (British Land share and leisure space) 4.4 MILLION SQ FT refurbishment. Completion anticipated end 2012. £85 million) Contracted rent £200 million, (British OFFICE BUILDINGS 16 Land share £107 million) Average office passing 30 ACRES Exchange House – 390,000 sq ft rent £47 per sq ft Weighted average lease term SIZE OF SITE Principal occupiers are Herbert Smith, F&C including breaks 9.9 years, to expiry 11.9 years 100% FREEHOLD/VIRTUAL FREEHOLD INTERESTS Asset Management Ltd and Societe Generale. RENT PASSING £164 MILLION Broadwalk House – 290,000 sq ft BRITISH LAND SHARE £82 MILLION Principal occupiers are Ashurst and Calyon. CONTRACTED RENT £172 MILLION BRITISH LAND SHARE £86 MILLION 1 Appold Street – 235,000 sq ft AVERAGE OFFICE Let to Deutsche Bank over seven floors, with CONTRACTED RENT £48 PER SQ FT a Virgin Active health club at basement level. WEIGHTED AVERAGE LEASE TERM 8.2 YEARS 10 Exchange Square – 161,000 sq ft INCLUDING BREAKS TO EXPIRY 10.2 YEARS Multi-let to occupiers including Herbert Smith, Close Brothers, Western Asset Management Broadgate is owned in joint venture with and Legg Mason. Blackstone Group. Situated in the heart of the City of London’s 201 Bishopsgate – 418,000 sq ft Square Mile, this modern and mainly- The property was completed in April 2008. pedestrianised development, which opened in The offices are 98% let to Alpari, Henderson, 1991 was built on the site around and above Landesbank Baden-Wurttemburg, Mayer Liverpool Street station, one of London’s mainline Brown and Scotia Bank with 10,000 sq ft national railway stations. The estate has been remaining to let. progressively developed over the last 20 years and The Broadgate Tower – 397,000 sq ft today, comprising over 4.4 million sq ft of office, retail and leisure space, it is a dynamic, thriving The property was completed in August 2008. business community where over 30,000 people The offices are multi-let to occupiers including work each day. Dickson Minto, Gill Jennings, Greenlight, Itochu Europe plc, Liquidnet, Banco Itaú, Reed Smith 1–3 Finsbury Avenue – 470,000 sq ft and Regus with 100,000 sq ft vacant. Part of the UBS campus headquarters. OTHER KEY CITY OFFICES: 1–3 Broadgate – 375,000 sq ft Principal occupiers include UBS and ICAP. The property incorporates Broadgate Circle retail and leisure facilities. 4 and 6 Broadgate – 428,000 sq ft Resolution to grant planning consent for new 700,000 sq ft headquarters pre-let to UBS. Conditions to be satisfied including completion of S106 Agreement.
Ropemaker Place, EC2 – 594,000 sq ft Ropemaker achieved practical completion in May 2009. The offices are multi-let to occupiers including Liberum Capital, Macquarie Group, Markit and The Bank of Tokyo-Mitsubishi UFJ. The building is fully let. www.ropemakerlondon.com
54 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 55 338 Euston Road – 114,000 sq ft Road – 114,000 338 Euston and The property is arranged 17-storeys over The major occupiers. six office to is multi-let ft sq 59,100 occupying Livre, is Hachette occupier are occupiers The other office on eight floors. Sharp & Dohme, SunPower Regus, Merck and British Telecom. Corporation, ZS Associates in completion The property practical achieved The property is arranged over 2009. September let accommodation with the office nine floors The property also Aegis Group. to in its entirety accommodation, 3,000 sq ft of retail circa. provides offer. under all of which is currently ft – 255,000 sq Street 20 Triton in completion practical reached Street 20 Triton building provides The ten-storey 2009. December let accommodation 245,000 sq ft of office circa. Dimensional Fund Lend Lease, Gazprom, to sq ft remains 14,000 Only Ricoh. and Advisors let. to available OFFICES: END WEST OTHER York House, W1 – 132,000 sq ft York 2007 and in early The property was completed 9,000 sq space, sq ft of office 90,000 over provides units. British and 22 residential space ft of retail as 40,000 sq ft of the offices some Land occupies of the building and the remainder its Head Office, Moor including Bunzl, GIC, occupiers to let is fully Flatt, HSBC and Palmer Hurley Capital, Park Valerie. Patisserie SW1 – 76,000 sq ft Street, 39 Victoria nine occupiers, to building is let The nine-storey Aegis Minute.com, Last including Finmeccanica, It is Services and the Labour Party. Defence refurbishment that a comprehensive anticipated in May 2012. expiries on lease will be undertaken 10 Triton Street – 121,000 sq ft – 121,000 Street Triton 10 6 100%
13 ACRES 1.2 MILLION SQ FT 1.2 MILLION
REGENT’S PLACE ESTATE REGENT’S 1 The six-storey building provides a mix of office, building provides The six-storey of 185,600 The offices space. and leisure retail and London Origin, JP Morgan Atos to let sq ft are & Capital. Road – 125,000 sq ft350 Euston General Medical to multi-let are The offices Beatty, One Bank Capital Balfour Council, Elexon, Limited. and Networking People BRITISH LAND SHARE LAND SHARE BRITISH A OFFICE GRADE retail (and associated space) and leisure OFFICE BUILDINGS SIZE OF SITE – 380,000 sq ft Tower Euston with the The building is arranged 36-storeys, over HM Government. to let accommodation office Located on the Marylebone Road/EustonLocated Road main arteries, Regent’s corridor, one of London’s position at the north prominent a occupies Place underground End. Four West end of London’s national mainline railway and two stations – and Euston St Pancras Cross – King’s stations London, transport links around excellent provide via Eurostar. and internationally nationally million sq ft of 1.2 comprises today, The estate It is a space. and residential leisure retail, office, evolve. to that continues vibrant workplace at NEQ, its final phase of development Undergoing in will have doubled the estate and in completion 2 million sq ft where to years four the last size over will live or work. people 14,000 1, 4 and 7 Triton Square – 217,000 sq ft – 217,000 Square 4 and 7 Triton 1, £60 £42 per sq Contracted rent rent Contracted 11.2 years 11.2 £43 million , to expiry, to , Average office contracted rent rent contracted office , Average Weighted average lease term including breaks term average lease Weighted 1.6 million sq ft 1.6 OFFICEassociated (and space) and leisure retail interests freehold freehold/virtual 100% Rent passing million ft 8.7 years £1.0 billion £1.0 VALUE TOTAL billion £1.0 LAND SHARE BRITISH Understanding British Land Understanding WEST END OFFICES END WEST 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 55 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 56
OFFICE DEVELOPMENTS
COMMITTED 2.2 million sq ft OFFICE (and associated retail and leisure space) £0.4 billion CURRENT VALUE £0.3 billion BRITISH LAND SHARE £0.7 billion COST TO COMPLETE (BRITISH LAND SHARE)
£1.2 billion NORTH EASTERN QUADRANT (NEQ), END VALUE (BRITISH REGENT’S PLACE, NW1 LAND SHARE) BRITISH LAND SHARE 100% SIZE 500,000 SQ FT City: 1.5 million sq ft of which 891,000 sq ft is CURRENT VALUE £78 MILLION pre-let or under offer representing an investment COST TO COMPLETE £211 MILLION of £0.6 billion (British Land share) West End: 0.7 million sq ft representing an Construction has now commenced on the investment of £0.5 billion (British Land share) North East Quadrant of Regent’s Place to provide THE LEADENHALL BUILDING, EC3 Estimated notional interest to practical completion a 500,000 sq ft mixed-use scheme including 120,000 sq ft of residential accommodation. of the development programme of £0.1 billion. BRITISH LAND SHARE 50% The office design incorporates three glass SIZE 610,000 SQ FT buildings of eight-, ten-, and 16-storeys, with CURRENT VALUE £51 MILLION floor-to-ceiling glazed external cladding, linked COST TO COMPLETE £163 MILLION by two atria. The office element is designed by Wilkinson Eyre, with the apartments by Stephen Marshall Architects. In December 2010, we completed our joint venture agreement with Oxford Properties The development will complete Regent’s Place, to develop the building. which will increase to some 2 million sq ft of office, retail and residential space, providing Designed by Rogers Stirk Harbour and Partners, accommodation for 14,000 workers and residents. the 47-storey, 736 ft (224m) Leadenhall Building 80% of the residential apartments have will become one of the tallest and most iconic already been pre-sold. NEQ will be delivered buildings in the Square Mile. It will combine by Summer 2013. spectacular landscaped open space, retail and dining facilities with modern, flexible office 2–14 BAKER STREET AND space in the heart of the City’s insurance district. 95–99 BAKER STREET, W1 The seven-storey landscaped open space at the base of the building, covering nearly half an acre, BRITISH LAND SHARE 100% will be on a scale unprecedented in London. 158,000 SQ FT SIZE The development’s tapering shape delivers varied CURRENT VALUE £54 MILLION sizes of floor plates ranging from 21,000 sq ft COST TO COMPLETE £61 MILLION on the lower floors to 6,000 sq ft at the top of the tower, all with spectacular views over London. In April 2010, British Land bought 2–14 Baker Street In addition, locating the lift and service core on in the West End. Planning consent was granted in the north side at the rear of the building creates 2009 for 139,000 sq ft of office space with retail units regular, efficient and flexible floor plates which will at ground level. Construction has commenced be able to meet a broad range of occupiers’ needs. with completion expected in February 2013. In May 2011, we announced we had agreed British Land also has planning consent to non-binding Heads of Terms with Aon Limited refurbish residential and retail accommodation for a 191,000 sq ft pre-let at the building (levels at 95–99 Baker Street to deliver 19,000 sq ft of 4–13) with options to take up a further 85,000 sq ft residential and 6,200 sq ft of retail space in early (levels 14–18). 2012. The residential element has been profitably pre-sold.
56 Understanding British Land 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 57 Pages 01–09 Understanding British Land
PROSPECTIVE 3.5 million sq ft SIZE £39 million CURRENT VALUE Pages 11–23 Strategy 199 BISHOPSGATE, EC2 £35 million BRITISH LAND SHARE 50% SIZE 142,000 SQ FT BRITISH LAND SHARE CURRENT VALUE £24 MILLION Colmore Row, Birmingham; Detailed planning COST TO COMPLETE £17 MILLION 280,000 sq ft British Land and Blackstone Group are Meadowhall Metropolitan, Sheffield; to undertake the major refurbishment of Outline planning – mixed-use 199 Bishopsgate, with delivery of 142,000 sq ft 2.2 million sq ft of high-quality office accommodation planned MARBLE ARCH HOUSE, W1 New Century Park, Coventry; for the end of 2012. Outline planning – mixed-use Pages 25–57 Our portfolio Planning consent was granted in February 2011 BRITISH LAND SHARE 100% 1 million sq ft for the comprehensive refurbishment of the SIZE 86,000 SQ FT 6–9 Eldon St, EC2; building located opposite Broadgate’s newest CURRENT VALUE – Pre-submission buildings, 201 Bishopsgate and The Broadgate 33,000 sq ft Tower. Work is expected to start in summer 2011. COST TO COMPLETE £54 MILLION
In January 2011, British Land entered into a conditional purchase of Marble Arch House. Completion is subject to vacant possession and conclusion of rights of light, still anticipated in mid-2011. Marble Arch House is on the corner of Seymour Street and Edgware Road, located within Portman Village and a short walk from Oxford
Street and Hyde Park. The existing site consists Pages 59–61 Financing strategy of two mixed-use five-storey buildings, 32–50 Edgware Road and 62–64 Seymour Street. The new development, which has detailed 5 BROADGATE, EC2 planning consent, has been designed by Bennett’s Associates Architects and will deliver exceptional BRITISH LAND SHARE 50% quality office, residential and retail space. The SIZE 700,000 SQ FT development has been designed to achieve a BREEAM excellent environmental rating. CURRENT VALUE £75 MILLION The new building will comprise 60,000 sq ft of COST TO COMPLETE £162 MILLION high-quality office accommodation together with PRE-LET RENT £19 MILLION PER ANNUM 15,000 sq ft of retail space. Adjacent to the new office building will be a development of ten luxury In August 2010, British Land and Blackstone Group residential apartments with a 5,000 sq ft restaurant signed an Agreement for Leases with UBS to unit at ground level built behind the retained period Pages 63–70 Corporate responsibility develop a new 700,000 sq ft building on the existing Victorian façade of 62–64 Seymour Street. site of 4 and 6 Broadgate. UBS is currently the Demolition and ground works are expected to largest occupier at Broadgate and the agreement start in mid-2011 with practical completion affirms their commitment to the estate. On receipt scheduled for mid-2013. of planning, construction is expected to start in mid- 2011 with completion during the second half of 2014. 5 Broadgate will include four trading floors capable of accommodating approximately 750 traders per floor. The lease is for an average term certain of 18.2 years at an initial rent of £54.50 per sq ft subject to annual RPI increases. This new building represents a further stage in the successful evolution of the Broadgate office estate and the retention of one of the world’s leading investment banks in the heart of the City of London. www.5broadgate.com
Understanding British Land 57 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 58 Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 59 WITH SUFFICIENT OPTIMALLY FINANCING STRATEGY FINANCING ADDITIONAL REQUIREMENTS ADDITIONAL ARISE MAY WHICH WE AIM TO ENSURE BRITISH ENSURE TO WE AIM OUR STRATEGY AND COVER AND STRATEGY OUR FUNDS TO IMPLEMENT IMPLEMENT TO FUNDS LAND IS FINANCED 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 59 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 60
FINANCING STRATEGY
> THE SCALE OF OUR BUSINESS, COMBINED WITH THE SECURITY AND STABILITY OF OUR RENTAL INCOME FLOWS, MEANS WE ARE ABLE TO FINANCE OUR BUSINESS ON COMPETITIVE TERMS FROM A BROAD RANGE OF SOURCES.
We believe this gives us a significant advantage Debt financing is used to enhance returns. In determining the over the many smaller, less well capitalised optimal level of gearing for the business, the Board considers a range of factors including our ability to refinance and the impact property companies particularly in today’s on the aggregate risk of the business including development risk. environment where the availability of debt Our preferred range of gearing is a Loan to Value ratio (LTV) on finance is highly constrained. a proportionally consolidated basis of 40% to 50%, with a short- term maximum of 55%. At 31 March 2011 our LTV was 45%. We aim to ensure that the Group and its joint ventures and funds (which account for half of our assets) are optimally financed with Our debt financing is provided from a variety of sources. sufficient resources both to implement the strategy agreed by the The average maturity of our debt is long at 10.1 years on a Board (together with our partners in the case of joint ventures proportionally consolidated basis, reflecting the long-term nature and funds) and cover additional requirements and opportunities of our lease structures. Our debt financing includes long-term which may arise. securitisations, secured debentures, unsecured loan notes, and shorter-term unsecured facilities available for immediate The principal objectives of our financing policy therefore are to: drawdown. This provides us with significant flexibility enabling us to take advantage of opportunities as and when they arise. > Minimise the cost of capital through a mix of debt and equity finance; The joint ventures and funds are able to raise finance on > Raise debt from a variety of sources, accessing attractive the strength of their assets with no recourse to the partners: market opportunities from time-to-time; we agree the financing strategy with our partners and other co-investors. The greater proportion of our joint ventures > Maintain a spread of maturities, including longer-term and funds (by value) are financed by long-term ring-fenced financing supported by committed income under long leases; securitised debt where rents comfortably exceed interest and > Maintain significant committed undrawn loan facilities, amortisation payments. Others are financed by shorter-term to support current and future business requirements; specific facilities or purely by funds provided by shareholders – in each case structured to support the strategic objectives > Actively manage financial risks, including interest rate, of the fund or joint venture, while providing flexibility. foreign exchange, liquidity and counterparty risks.
Our joint ventures and funds are included in our accounts as equity net investments and are not fully consolidated. We consider the equity and debt funding structure of British Land both on a group statutory basis and a proportionally consolidated basis, including the Group’s share of joint ventures and funds.
60 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 61 2011 24% 45% 72% 4.7% 4.9% £1,714m £4,411m £2,337m 3.0 times 2.2 times 10.1 years 10.7 years 10.7 2010 25% 47% 5.3% 5.2% £2,861m £4,210m £1,550m 2.3 times 2.0 times financing policies p99–101 of the performance report of the performance p99–101 For more information on information more For floating interest rates based on LIBOR plus an average margin plus an average margin based on LIBOR rates interest floating financial by 26 different provided of 47 bps. These were £0.5 billion of the facilities year-end and at the fiscal institutions fully are Placements had been drawn down. The US Private years. 16 up to of terms drawn for without separately, each financed and funds are Our joint ventures 2011, at 31 March In total repayment. British Land for to recourse debt and funds had £5.9 billion of external the joint ventures securitisation £2.8 billion), arranged through share (British Land’s of the the requirements to according specifically or bank facilities two joint ventures During the year, of each venture. business refinanced, successfully were plc between British Land and Tesco banks, and at finance three of £245 million from raising a total than the maturing facilities. favourable more overall rates a number refinance to a gradual programme continuing are We and and our joint ventures both of the Group of the facilities the year-end, Post years. few the next over funds which expire £560 million five-year group a new completed we successfully £720 million an existing replace to facility revolving unsecured 2011. in August have matured which would facility increased rating was credit our senior unsecured During the year and of our joint venture thirds A–. Two BBB+ to from Fitch by is AAA. grade and of that, two thirds fund debt is investment 1 1 2 2 3 Group and share of joint ventures and funds: of joint ventures and share Group Net debt Loan to value Loan to Loan to value Loan to 1 and tax/net interest. interest before profit Underlying 2 Debt/property investments. and 3 A (page 169). see table £4,081 million), million (2010: basis) £4,317 Net debt (EPRA including 2011; billion at 31 March had net debt of £1.7 The Group a proportionally and funds (on of debt in joint ventures our share a net debt was £4.4 billion. This represents basis), consolidated and 45% on a proportionally the Group of 24% for value to loan and within year the previous similar to broadly basis, consolidated Our average debt maturities range set by the Board. the target on a years 10.1 and the Group for years high at 10.7 remained basis. consolidated proportionally British Land uses two main types with recourse of debt: i) by specific assets either secured repayment, British Land for to British Land and in to and ii) non-recourse or unsecured; principally British Land is provided to debt with recourse Secured with long rates interest at fixed billion of debentures by £1 secured maturities and no amortisation. are These debentures covenants. with common pool of assets combined a single against withdraw, substitute to use our rights under the debentures We in the security pool, collateral) or add properties (or cash ratios effectively, cover and income manage the value to in order ratios if necessary. remedy and sales deal with any asset British Land is primarily: to debt with recourse Unsecured Placements. and b) US Private facilities credit a) our bank revolving of drawing and repayment full flexibility provide The bank facilities supportingat short without additional cost, and current notice up terms for committed and are requirements, business future at £2.8 billion of facilities we had 2011, At 31 March five years. to Year ended 31 March Year Group: Net debt facilities Undrawn committed Weighted average interest rate average interest Weighted Weighted average debt maturity average debt Weighted years 12.4 Weighted average debt maturityWeighted rate average interest Weighted years 11.1 % of debt at fixed/capped interest rates% of debt at fixed/capped interest 80% Interest cover Interest Interest cover Interest KEY FINANCING STATISTICS KEYFINANCING ‘ring-fenced’ structures, mainly our joint ventures and funds. joint ventures our mainly structures, ‘ring-fenced’ Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 61 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 62 Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 63 efficiently buildings expectations 64 Our strategy 66 Managing buildings 67 sustainable Developing 68 Enhancing biodiversity 69 customers’ Exceeding 70 communities on local Focusing SUSTAINABILITY – US AND TO CORPORATE RESPONSIBILITY CORPORATE WE AIM TO BE THE BEST BEST THE BE TO WE AIM THE AT OUR STAKEHOLDERS OUR ISSUES THAT MATTER MATTER THAT ISSUES MOST 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 63 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 64
CORPORATE RESPONSIBILITY OUR STRATEGY
> WE’RE COMMITTED TO DOING BUSINESS THE RIGHT WAY; MANAGING, DEVELOPING AND FINANCING BUILDINGS IN ENVIRONMENTS WHERE BUSINESS AND LOCAL COMMUNITIES CAN THRIVE.
In 2010/11, we carried out a thorough review of We aim to exceed regulatory requirements, striving to improve our corporate responsibility strategy and activities, consistently by setting medium-term and annual targets. We publish comprehensive performance data and progress commissioning independent research to get the statements against our targets each year, with regular updates views of occupiers, investors, employees, local throughout the year. We are signatories to the UN Global people, local authorities, Government and other Compact and report to the Global Reporting Initiative B+ key stakeholders. We also consulted experts on standard. Our key performance data is independently assured under the ISAE 3000 standard. a range of issues, reviewed best practice and benchmarked our performance. DRIVERS FOR CORPORATE RESPONSIBILITY Our corporate responsibility strategy is core to our corporate Through this review, we identified five focus areas as being the aim of building the best REIT in Europe, ensuring we: most important for us and our key stakeholders. They are also core to our corporate aim of building the best REIT in Europe: > Do the right thing – as individuals and as a company; 1. Managing buildings efficiently; > Manage physical, fiscal and regulatory risks; 2. Developing sustainable buildings; > Enhance and care for our reputation; 3. Enhancing biodiversity; > Protect and create asset value. 4. Exceeding customers’ expectations; 5. Focusing on local communities. EXTERNAL RANKINGS GOVERNANCE We aim to be the best at the issues that matter most, Head of Planning and Corporate Responsibility, Adrian Penfold, benchmarking our performance against our peers and others: reports directly to Chief Executive, Chris Grigg, on corporate > Ethibel Register 2011 – Pioneer; responsibility, meeting fortnightly. The Board is updated each quarter on key issues, opportunities and our performance. > Ethisphere’s World’s Most Ethical Companies 2011 – Our strategy is also presented to the Board annually. leading UK REIT;
Key members of our Corporate Responsibility Committee meet > Oekom Corporate Responsibility Review 2010 – fortnightly to maintain momentum on our action plans. They also real estate leader; hold regular meetings with other members of our Head Office > The Sunday Times 60 Best Green Companies team and consultants, and six-monthly meetings with our supply Index 2010; chain partners for managed properties and developments. This Committee is our highest governing body for environmental and > Justmeans Global Sustainable Performance Leaders social performance. The Board assesses the performance of the 2009 – leading UK REIT; Committee members against our corporate responsibility > Dow Jones Sustainability Index; targets, which affects their remuneration. Corporate responsibility activities and reporting are now well integrated into our day-to- > FTSE4Good Index. day management processes.
For our full CR Report 2011 visit www.britishland.com/crreport2011
64 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70 65 agree British Land agree quality delivers in performance 91% We encourage our encourage We to cycle to staff meetings, for by providing instance cycling pool bikes, for fobs gear and key cycle the Barclays scheme. hire Building energy and water audits and water Building energy and system metering Energy Management Brief for Sustainability plan assessment Portfolio flood investment defence Flood Developments Brief for Sustainability Acquisitions Brief for Sustainability Developments Brief for Sustainability certified Environmental ISO 14001 Community Charter survey Community stakeholder engagement local Effective optimisation process required where Management System > > > > > > > > > > > > are veryare satisfied at work 80% Head Office staff survey staff 2011 Head Office rate 92% response British rate as Land highly an employer 92% 2010/11 PERFORMANCE 2010/11 Fiscal burden from environmental from burden Fiscal our reputation impact on Adverse for sell an asset Inability to Difficulty flood in securing rates insurance Increased Difficulty planning in securing Difficulty the asset in letting value asset Risk of accelerated taxes environmental from burden Fiscal or delay in securing planning Failure our reputation impact on Adverse taxes assets and ability let to full value cover insurance cover flood for and building permissions depreciation approval > > > > > > > > > > > health and safety , as well as , as well risks relating to our occupiers and staff our occupiers to risks relating p102–105 RISK DESCRIPTIONRISK AREAS IMPACT KEY MITIGANTS This year, we launched a number of initiatives to create create we launched a number of initiatives to This year, held We the business. across approach integrated a more monthly away day, introduced staff company-wide our first independent our first meetings and commissioned all-staff survey. satisfaction staff of this survey very results were The overall good, of our efforts create to the effectiveness demonstrating are thrive. We can in which our people an environment action plan based now putting a comprehensive together on the findings of the survey. OR PLAN TO DEVELOP ASSETS OR PLAN DEVELOP TO For PEOPLE OUR we leverage strategy deliver our corporate To the efforts, skill and judgement of a relatively our extensive across team small Head Office portfolio. FAILURE TO IMPLEMENT FLOOD FLOOD IMPLEMENT TO FAILURE STRATEGY ADAPTATION RISK EACHFOR ASSET EITHER DURING DEVELOPMENT OR PORTFOLIO EXISTING OUR IN BUILD AND DESIGN TO FAILURE SUSTAINABLE ENVIRONMENTALLY BUILDINGS IN A RAPIDLY AND REGULATORY CHANGING ENVIRONMENT COMMERCIAL WITH LOCAL POOR ENGAGEMENT WE OWN WHERE COMMUNITIES OUR KEY CORPORATE RESPONSIBILITY RISKS RESPONSIBILITY KEY CORPORATE OUR potential and greatest of occurrence likelihood the highest risks identified as having These are and risks that we consider many more are There stakeholders. key and impact on our business responsibility. corporate to our approach inform and that monitor, UTILITY MANAGE TO FAILURE EACH ASSET AT CONSUMPTION WE MANAGE Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 65 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 66
CORPORATE RESPONSIBILITY OUR STRATEGY
1. MANAGING BUILDINGS EFFICIENTLY
Key stakeholders such as occupiers, employees NEXT YEAR’S CHALLENGE and investors expect us to lead on energy > Supporting a change in building management culture efficiency to cut costs for us and our occupiers, to deliver on-going energy reductions. at the same time as reducing carbon emissions. NEXT YEAR, WE WILL: > Roll out our energy optimisation process at more buildings, In nine of our multi-let office buildings, we recently installed a new and pilot it at two shopping centres; energy metering system and implemented a remote monitoring > Work closely with building management teams to achieve process to optimise efficiency, following a successful pilot at our projected energy reductions where we have implemented Head Office (see below). This will reduce base-build energy use our optimisation process; (common parts and shared services) by at least 10% in each building. We expect to recoup capital costs within three years > Undertake selective base-build energy and water reviews through energy savings. which will highlight opportunities for capital investment to drive further reductions in each building; We also continue to work with our office occupiers to drive energy > Where office occupiers are committed to energy reductions in the areas they control, sharing information and reductions, offer to fund energy reviews in their areas. providing support. We provide our office occupiers with six- monthly building environmental statements, containing detailed, year-on-year building management and occupier performance For our 2011/12 targets visit comparisons. Our green building groups, with occupiers and www.britishland.com/crreport2011 building management teams, were recognised with a 2010 Better Buildings Partnership award.
2010/11 PERFORMANCE
ENERGY USE WATER USE RECYCLING LIKE-FOR-LIKE ENERGY USE kWh million –15% –14% 53% 2010/11 76.7 Less usage across Less usage across Recycling across our like-for-like our like-for-like our managed 2008/09 89.9 portfolio than two portfolio than two portfolio years ago, saving years ago, saving (2010: 43%) occupiers £900,000 occupiers £70,000 Office Shopping centres Retail parks Continental Europe
CASE STUDY YORK HOUSE
At our Head Office, we won the Property Week Sustainability Achievement Award and the CIBSE Building Operation Award 2011 for energy reductions, in cooperation with all other occupiers. This year, we reduced British Land influenced energy use at York House by 38% compared to 2008/09 and occupiers reduced energy use in their areas by 11%. The total savings over the last two years were 2.4 million kWh, cutting emissions by over 1,000 tonnes and saving £141,000. This is largely thanks to effective day-to-day management and a new energy metering system and optimisation process which we are now rolling out, with occupier agreement, across our office portfolio.
66 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70
175,000 67
150,000
125,000 Tonnes visit (2009/10: 61,353) (2009/10: 100,000 60,347 (2009/10: 619) (2009/10: 910
75,000 26,929) (2009/10: (2009/10: 39,887) (2009/10: DEVELOPMENT WASTE 96% 86%) landfill (2010: diverted from 29,052 40,339 visit 50,000 (2009/10: 45,251) (2009/10: Greenhouse Gas Emissions Report Gas Emissions Greenhouse 31,223 161,871
174,039 25,000 2011/12 targets 2011/12 Explore opportunities to achieve our zero-carbon target target opportunities our zero-carbon achieve to Explore improve to and architects with our contractors Work changes through footprint our embodied carbon Reduce Transforming building design and engineering across building design and engineering across Transforming on development projects; on development materials; sustainable for standards procurement of materials. our designsto and procurement our supply chain, against a rapidly changing regulatory changing a rapidly chain, against our supply framework. Energy use: Energy use: offices: multi-let areas in Occupied Shared services: services: Shared Common parts: parts: Common Developments: Developments: Travel, water use and refrigerant loss: 2010/11 2010/11 2009/10 2009/10 www.britishland.com/crreport2011 GREENHOUSE GASGREENHOUSE EMISSIONS SOURCE BY our detailed For NEXT YEAR, WE WILL: > > > our For NEXT CHALLENGE: YEAR’S > www.britishland.com/crreport2011 2010/11 PERFORMANCE 2010/11 Excellent sustainability ratings for ratings for sustainability Excellent 100%) (2010: developments office new BREEAM 100% vestor-led Carbon Disclosure Project Carbon Disclosure vestor-led a score of 70% in 2010, up from 54% in 2009. We 54% in 2009. up from of 70% in 2010, a score DEVELOPING SUSTAINABLEBUILDINGS 30% on average standards than current less 27%) (2010: our developments across LOWER CARBON EMISSIONS CARBON LOWER We have participatedWe in the in with 2006, since parts the common of our managed across neutral carbon were on focus to continued running. We year portfolio the third for or use of low-carbon efficiency and increasing energy improving £65,000 of carbon purchasing before sources, energy zero-carbon tonnes). 18,000 (2010: of emissions tonnes offset to 13,900 credits year next because will offset we emissions year This is the last us Efficiency will require Scheme Energy CRC the Government’s purchase. we all energy for allowances carbon buying start to the scheme is estimated to exposure 2014 to 2012 Our forecast use We million in 2015. £1.1 be £800,000 per annum rising to to Gas Protocol Greenhouse Institute’s Resource the World footprint. our carbon calculate to methodology OUR CARBON FOOTPRINT CARBON OUR the Carbon British Land was awarded In 2010, our achievements recognising Standard, Trust use energy from emissions carbon in reducing our portfolio. across 2010/11 PERFORMANCE 2010/11 2. efficient and more are buildings Sustainable – and age better operate, to flexible also they emissions. carbon have lower engaging and actively practice push the agenda by sharing best We industry and occupiers. the construction with the Government, Brief for our Sustainability we updated In February 2011, with industry experts, consultation following Developments, our project from and feedback of changing regulation a review on what chain our supply clarity to brief provides Our new teams. innovation them, at the same time as encouraging from we expect targets. project-specific and stretching certified Environmental our ISO 14001 apply to continued We development our expanding across Management System Brief processes ensuring that our Sustainability programme, construction. design and responsible deliver both sustainable Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 67 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 68
CORPORATE RESPONSIBILITY OUR STRATEGY
3. ENHANCING BIODIVERSITY
Biodiversity is essential for many of the Earth’s NEXT YEAR’S CHALLENGE: natural systems to function, and biodiversity > Engaging on biodiversity with our occupiers, local people, initiatives present opportunities to improve supply chain and peers. landscaping, reduce flood risks and engage NEXT YEAR, WE WILL: with occupiers and local people. > Review and update our Biodiversity Programme and related guidance, in partnership with our property management Our Biodiversity Programme helps us to protect and enhance teams and landscape architects; habitats and species throughout the property lifecycle. Ecologists > Commission further studies into our green and brown monitor our biodiversity impacts. roofs to track their results and identify more opportunities to enhance their effectiveness. This year, we worked with occupiers and property managers at a number of our properties to encourage biodiversity. For instance, we helped Baring Asset Management to retrofit a green roof For our 2011/12 targets visit at 155 Bishopsgate, and we planted a wildflower meadow at Fort www.britishland.com/crreport2011 Kinnard Shopping Park.
Since 2004, we have created more than 60,000 sq ft of new green roof space, at seven of our buildings in Central London.
Based on stakeholder feedback, we have decided to increase our biodiversity efforts.
2010/11 PERFORMANCE
MAJOR DEVELOPMENTS MANAGED ASSETS 90% 34% are on track to result in a net positive improvement are covered by Biodiversity in site biodiversity (2010: all) Action Plans (2010: 31%)
CASE STUDY ‘BEYOND THE HIVE’
Together with the City of London Corporation, we delivered ‘Beyond the Hive’, a competition to encourage biodiversity in the built environment. This saw five-star insect hotels created in parks across the City.
The Beevarian Antsel and Gretel Chalet (pictured) won the public vote. It was made entirely from materials collected within the city.
68 Understanding British Land Understanding British Land Strategy Our portfolio Financing strategy Corporate responsibility Pages 01–09 Pages 11–23 Pages 25–57 Pages 59–61 Pages 63–70
100 69
89 90 % 85 83
80 74 73
68 70 65 63
60 53
50
40
visit 30 23 17 17 20 14 2011/12 targets 2011/12 10 Drive service excellence by developing a new Retailer Retailer a new by developing serviceDrive excellence and reviews of our mid-year the transparency Enhance maintaining while manage costs actively Continue to Reinvigorate our key account programme and invest and invest programme account key our Reinvigorate Charter and tailored Customer Charters for individual Charters for Customer Charter and tailored buildings; office renewal and insurance statements year-end forecasts, service reader-friendly more in line with our new, reports, budget packs; charge efficient smart through procurement, high standards, thinking. management and creative in customer relationship management tools, making making management tools, relationship in customer as often want as they liaise with the right people, we sure want; and in the way that they Satisfaction with British Land Value-for-money (service charge) Responsiveness needs Understanding Satisfaction with Estates Broadgate www.britishland.com/crreport2011 > > > our For EXCELLENT AS OR GOOD RATING OCCUPIERS OFFICE NEXT YEAR, WE WILL: > Retail occupier Retail understands retail. They provide a service provide They retail. understands our business.” help us maximise to “British Land is a very flexible company that company is a very“British Land flexible 100
88 90 % 80
78 80
67 70 66 64 63
59 60 le and otherwise and le Occupiers Satisfaction 2009) Index
50 2009 37 40 33
30 2011 21
17 20
EXCEEDING CUSTOMERS’ EXPECTATIONS 10 Continuing to understand and anticipate occupiers’ needs as occupiers’ and anticipate understand Continuing to the business environment changes,the business environment and supporting our retailers our new as delivering as well climate, in a difficult economic minimising impacts on neighbours. plan whilst to developments 3 Industry average Satisfaction with British Land Value-for-money (service charge) Responsiveness needs Understanding Satisfaction agents with managing Industry average: Satisfaction(Occupiers Survey where comparab 2010 2010/11 PERFORMANCE 2010/11 NEXT CHALLENGE: YEAR’S > 4. service customer and outstanding Excellent financial performance, good for buildings are rates. maximise occupancy helping to delivering our occupiers, be the partner aim to for of choice We we carried service buildings. In 2011, and outstanding excellent also We survey. customer out our fourth independent UK with actively engage more to our in-house team expanded property on day-to-day management. occupiers the effectiveness demonstrated occupiers from Feedback savings achieved We costs. efforts cut occupancy to of our recent services on security such as cleaning, contracts by retendering insurance competitive as well as by negotiating and landscaping, of service charges, the transparency also enhanced We rates. budget packs. of new with the introduction RETAIL OCCUPIERS RATING AS GOOD EXCELLENT OR Understanding British Land Understanding 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 69 Page 11:01 16/06/2011 2011 Land_Report British Understanding 8231 8231 Understanding British Land_Report 2011 16/06/2011 11:01 Page 70
CORPORATE RESPONSIBILITY OUR STRATEGY “For nearly 20 years British Land has been working in partnership with local people, taking their needs and expectations into consideration. This is an excellen t partnership that will continue to grow and make a difference to the lives of local people.” Nasim Ali Leader of Camden Council and local councillor for Regent’s Park Ward 5. FOCUSING ON LOCAL COMMUNITIES
We have a responsibility to the communities in NEXT YEAR’S CHALLENGE: which we build and manage properties. Local > Managing local expectations set by our new Community support is also an essential part of the planning Charter, in a challenging economic climate. process and will become more so with the NEXT YEAR, WE WILL: Government’s Big Society agenda. > Publish a Community Charter, setting out our commitment to local communities; We are stepping up our efforts to engage with local communities > Work with suppliers, local people, community groups, around all our major properties and developments, to create local authorities and other partners to implement our environments in which businesses, communities and individuals Community Charter; can thrive. > Review our stakeholder satisfaction survey results and This year, we introduced two new people to our Head Office team develop a plan for future surveys; to focus on community engagement and planning. We also carried > Explore further opportunities to support apprenticeships out a stakeholder survey to evaluate local satisfaction with us and employment initiatives. and our suppliers, and to identify opportunities to improve our performance further. For our 2011/12 targets visit We continued to support a range of charities and community www.britishland.com/crreport2011 initiatives, through cash contributions, in-kind donations and time spent supporting local projects. These included our national charity Fairbridge, Capital Kids Cricket, arts charity Create, the East London Business Alliance (ELBA), Habitat Heroes, LandAid and 2010/11 PERFORMANCE the Prince’s Regeneration Trust.
We commissioned a review of our economic impacts by PwC, £877,000 £4.9m 31% to improve understanding of how we affect local communities and investment in good contributed to local of our Head Office the UK economy. Our occupiers contributed £10.6 billion to the causes, through initiatives through team volunteered UK economy through their business activities at our properties in cash, time and the planning process during work time 2009/10 (gross value added), supporting 142,000 jobs across the UK gifts in kind (2010: £11.2 million) (2010: 27%) through direct employment and spending with suppliers. Our own (2010: £717,000) activities contributed almost £900 million, supporting 10,200 jobs.
CASE STUDY REGENT’S PLACE
At Regent’s Place, we won the Royal Town Planning Institute’s Sustainable Communities Award 2010 for regeneration, demonstrating how we have successfully transformed this area of London’s West End.
We have built a state-of-the-art community theatre and affordable housing units, created new pedestrian routes and a new public space, extended the public art collection and made a significant contribution to the refurbishment of a nearby youth club.
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UNDE BRITI
Head Office and Registered Office York House 45 Seymour Street London W1H 7LX Telephone +44 (0)20 7486 4466 Fax +44 (0)20 7935 5552 www.britishland.com [email protected]